Luminar stock price has crashed to a record low as concerns about its going concern remained. LAZR plunged by over 45% on Friday, a trend that continued in the premarket when it dropped by 3%.
Luminar’s collapse has led to a $13 billion wipeout as its market capitalization dropped from over $14 billion in 2021 to $40 million today.
Why Luminar stock price is crashing
Luminar is an American company that provides Light Detection and Ranging (LiDAR) products to automakers. Its LiDAR solutions help to power self-driving cars by providing the ‘eyes’ that help them in navigation.
Luminar has been building it LiDAR products in the past few years. Its main partner client is Volvo, one of the biggest automakers in the world. It also provides its LiDAR solutions to companies like Polestar, Mercedes, and Nissan.
Luminar stock price has collapsed because of a major earnings warning it delivered last week. It announced that it may run out of cash next year as the cash burn escalates.
The company also announced that it would lay off about 25% of it workers. This is notable because it was the second layoff announcement of this year.
In line with this, the firm announced that its CFO would leave the company to pursue other career opportunities. The company clarified that his exit was not because of any disagreement about its financials.
Business challenges remain
Luminar stock price has crashed amid the ongoing challenges to its business that pushed it to oust its founder and CEO, who is now trying to buy back the company.
The most recent results showed that the company’s revenue was just $15.6 million, down by 5% from the same period last year. It was down by about 17% from the previous quarter.
Luminar continued burning money during the quarter, with its net loss rising to over $30 million. Its non-GAAP loss was over $73 million. As such, last week’s announcement is a sign that the situation has moved from bad to worse.
Worse, Luminar lowered its forward guidance, signaling that demand for its products is still low. For example, it predicted that it will ship between 20k and 23k sensors this year, down by 30k to 33k in the previous quarter.
Will the LAZR stock price rebound?
Therefore, the potential question among investors is whether the LAZR stock will bounce back after the current crash.
The most likely scenario is where the Luminar stock price crashes as investors anticipate more dilution. This crash may push it below $.
However, it is still risky to short the Luminar stock price. For one, the cost of shorting the stock is substantial now that it has become a penny stock.
Also, there is a likelihood that it will go through a short-squeeze. This is possible as the stock has a short interest of 20.2%. It is common for heavily shorted companies to surge, as we have seen with Beyond Meat and OpenDoor.
The other risk for shorting the Luminar stock is that the founder is seeking to buy back the company. This crash has made it more affordable. Also, Volvo, its top client may opt to buy the company now that it has become a bargain.
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