Luminar Technologies, Inc.

LAZR Details

Luminar Technologies, Inc. (NASDAQ: LAZR) develops advanced sensor technologies for the autonomous vehicle industry. Its operating segments are 1) Autonomy Solutions, which designs and markets commercial lidar sensors, which use laser light to detect distance and create an accurate three-dimensional (3D) map for automobile mobility applications, and 2) Component Sales, which develops ultra-sensitive pixel-based sensors. It also designs, tests, and provides consulting services for non-standard integrated circuits to US customers, such as government agencies and defense contractors, for uses unrelated to autonomous vehicles. As of September 21, 2021, the company's market capitalization stood at USD 5.66 billion.

Accelerating Safety through Innovation and Customer Addition: As announced on September 02, 2021, LAZR debuted its Proactive SafetyTM system in on-road demos for European automakers at the (Internationale Automobil-Ausstellung) IAA Mobility Summit, Munich on September 07 – 12, 2021. Proactive SafetyTM enables proactive collision avoidance at significantly greater speeds by providing the vehicle with better-confidence detection, quicker and more outstretched than camera and radar. Concurrently, LAZR also announced the expansion of its customer ecosystem via integration partnership with Webasto and Inalfa, Tier 1 global automotive suppliers.

Q2FY21 Results: The company reported a YoY surge of 84.26% in revenues to USD 6.31 million in Q2FY21 (ended June 30, 2021) compared to USD 3.42 million in Q2FY20. Autonomy Solutions, which accounted for 92.28% of the revenue in Q2FY21, reported a sharp uptick of 1.07x, whereas the Component Sales segment declined by 20.81% YoY. Net loss for Q2FY21 increased to USD 36.83 million from USD 25.44 million in Q2FY20. As of June 30, 2021, its cash and cash equivalents (including marketable securities) were USD 580.44 million, and total debt amounted to USD 0.26 million.

Key Risks: In FY20, LAZR's top ten customers accounted for 94% of its revenue. Hence, the loss of such vital customers could hurt its financials. In addition, each share of LAZR's Class B common stock has ten votes, compared to one vote for each share of its Class A common stock. As of FY20, Mr. Austin Russell (Founder, President, and CEO) owns all outstanding Class B shares, accounting for approximately 82.8% of the voting power. This constrains the ability of other shareholders to influence corporate decisions.

Outlook: As of Q2FY21, LAZR expects to generate total revenue in the range of USD 30 – 33 million in FY21.

LAZR Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: LAZR's stock price decreased 40.13% in the past six months and is currently leaning towards the lower band of its 52-week range of USD 9.95 to USD 47.80. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is at 49.12. Considering the correction in the stock price, strong balance sheet, current valuation, and associated risks, we recommend a "Speculative Buy" rating on the stock at the closing price of USD 16.96, up 2.60% as of September 21, 2021.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.

Desktop Metal, Inc.

DM Details

Desktop Metal, Inc. (NYSE: DM) is focused on producing end-use parts using additive manufacturing (AM) systems (3D printing solutions). DM provides a portfolio of integrated AM solutions for various industrial and commercial end-users comprising hardware, software, materials, and services. It derives revenue from the sales of AM equipment, along with related accessories and consumables. It also generates service revenues from installation, training, post-installation hardware and software support, and various software solutions. In Q2FY21, the Americas accounted for 60.08% of DM's total revenue.

Achieving Inorganic Growth via Horizontal Acquisitions: On September 09, 2021, DM acquired Aidro, an Italy-based company engaged in the design and production of components for hydraulic and fluid power systems through AM for a variety of industries. This acquisition furthers DM's vision of delivering its key original equipment manufacturer (OEM) clients with exclusive design and application know-how, as well as a mix of best-in-class AM products and high-value parts production across applications using mass-production technology to generate low-cost parts and high-performance designs that overcome the restrictions of traditional manufacturing.

Q2FY21 Results: The company reported a YoY surge of 7.67x in total revenues to USD 18.98 million in Q2FY21 (ended June 30, 2021) compared to USD 2.19 million in Q2FY20. The Products segment, which accounted for 92.53% of the total revenue in Q2FY21, reported a sharp uptick of 10.47x, whereas the Services segment expanded by 115.35% YoY. However, net loss for Q2FY21 increased to USD 43.18 million from USD 23.77 million reported in Q2FY20. As of June 30, 2021, the company has cash and cash equivalents (including short-term investments) of USD 514.52 million and total debt of USD 0.31 million.

Financial Highlights (Source: Earnings Presentation, August 11, 2021)

Key Risks: DM operates in the highly competitive AM industry and faces direct competition from more significant players with higher financial and operational resources at their disposal. Hence, pricing pressure or superior product development by any of its competitors could affect its market share and impair its financial performance. In addition, DM outsources a considerable portion of its manufacturing operations to third-party manufacturers. Therefore, any failure on the part of these third parties in procuring the manufacturing components or subcontract engineering work could harm the company's financials.

Outlook: In FY21, DM expects to clock revenue of more than USD 100 million, along with an adjusted EBITDA in the range of USD (70) – (80) million. DM also expects to end FY21 with a run rate of USD 160 million (excluding the ExOne acquisition announced on August 11, 2021).

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

 (Analysis by Kalkine Group)

• % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

DM Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: DM's stock price decreased 41.11% in the past three months and is currently leaning towards the lower band of its 52-week range of USD 7.12 to USD 34.94. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is at 37.15. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 9.52. Considering the correction in the stock price, strong balance sheet, current valuation, and associated risks, we recommend a "Speculative Buy" rating on the stock at the current price of USD 7.62, down 0.26% as of September 21, 2021, 3:28 PM ET.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached. 

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