Lucid (NASDAQ: LCID) stock plummeted to a new nadir in Thursday’s trading, shaving off 4.7%. Earlier in the day, the stock had tumbled a substantial 8.3%, as S&P Global Market Intelligence data confirms.
The nosedive was triggered by Tesla slashing the price of its Model Y vehicle by 5,000 euros (about $5,430) in Germany and making similar cuts across France, Norway, and the Netherlands.
Tesla’s aggressive price reductions underscore a softening EV market, indicating challenging times ahead, not only for Tesla itself but for other industry players, one of whom is Lucid. Interestingly, despite this downturn, Lucid stock has never presented a more enticing buying opportunity.
Is it the right time to invest in Lucid stock?
Lucid, a newcomer in the EV scene, went public through a merger with a special purpose acquisition company (SPAC) in July 2021. With the recent dip, the stock is now trading nearly 95% below its peak value.
LCID PS Ratio (Forward) data by YCharts
Despite the drastic devaluation, the company is presently valued at roughly 4.6 times this year’s projected sales. More significantly, even with an optimistic business outlook, profitability is still a distant dream.
In Q3 2023, Lucid reported revenue of $137.8 million on vehicle sales of 1,457 and closed the quarter with $4.4 billion in cash, equivalents, and short-term investments. However, the cash burn rate is alarming, with the company recording a net loss of about $752.9 million during the same period.
The company’s long-term survival is contingent on significantly boosting vehicle production and sales while maintaining strong pricing power in the ultra-luxury market. With Tesla reducing prices and leading automakers like General Motors and Ford scaling back their EV production, Lucid is bound to feel the squeeze from weakened demand in the near future.
While the stock is trading at a massive discount from its peak, it still poses significant risk. However, if the company can surmount the looming challenges and approach profitability, its stock could potentially skyrocket. Nonetheless, investors must acknowledge the tough odds facing the business, as further declines in its already battered stock are not out of the question.
Should you invest $1,000 in Lucid Group right now?
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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool recommends General Motors and recommends the following options: long January 2025 $25 calls on General Motors. The Motley Fool has a disclosure policy.