When Lucid Group (NASDAQ: LCID) made its debut on the stock market in 2021, it was heralded as the next Tesla (NASDAQ: TSLA). Led by Peter Rawlinson, Tesla’s former chief vehicle engineer, and with ambitious production targets, Lucid garnered immense attention in the electric vehicle (EV) sector. However, the reality has been starkly different from initial expectations.
Despite aiming for 20,000 vehicle deliveries in 2022 and 49,000 in 2023, Lucid fell significantly short, delivering only 4,369 vehicles in 2022 and 6,001 in 2023. Supply chain hurdles, delays, recalls, and pricing challenges resulted in an 80% decline in Lucid’s stock value over the past three years.
Image source: Lucid.
Positive Indicators for Lucid Stock
Despite its tumultuous journey, some investors remain optimistic about Lucid’s future potential. With a focus on ramping up production and introducing new models, such as the Gravity SUV, Lucid aims to revitalize its market presence. Analysts project a significant revenue increase, expecting Lucid to achieve $762 million in revenue in 2024 and $1.9 billion in 2025.
At an enterprise value of $9.5 billion, Lucid appears reasonably valued at five times next year’s sales, compared to Tesla’s seven times next year’s sales.
Over the next four years, Lucid plans to expand its Arizona plant’s production capacity from 34,000 vehicles to 400,000 vehicles and increase its Saudi Arabian plant’s capacity from 5,000 vehicles to 155,000 by the “middle of the decade.” Supported by the Saudi Arabian government, which owns over 60% of its shares, Lucid is poised for substantial growth.
Ending the second quarter of 2024 with $4.3 billion in liquidity and receiving an additional $1.5 billion commitment from a PIF affiliate, Lucid’s financial position seems stable. If Lucid can execute its expansion plans successfully, analysts foresee revenue soaring to $3.6 billion by 2026, mirroring Tesla’s meteoric rise in the past decade.
Challenges Faced by Lucid Stock
Conversely, skeptics remain wary of Lucid’s trajectory. Despite efforts to boost production, ongoing price reductions, significant losses, and reliance on Saudi backers have raised concerns.
Lucid’s continuous price cuts, including discounts on its Air sedans, indicate a struggle to maintain pricing power. Anticipated net losses of $2.9 billion in 2024, $2.5 billion in 2025, and $1.7 billion in 2026 signal financial instability.
If Lucid fails to demonstrate a sustainable business model, the risk of running out of cash looms large. Insider selling activity, lackluster stock purchases, and substantial share dilution further amplify apprehensions among investors.
Conclusion: The Lucid Conundrum
While Lucid’s recent efforts may hint at stabilization, the stock’s current status lacks compelling reasons for immediate investment. Investors are advised to observe further developments before considering Lucid as a viable investment option.
Should Investors Consider Lucid Group?
Before committing funds to Lucid Group, evaluate the company’s performance against potential risks and opportunities. Conduct thorough research and remain informed of Lucid’s evolving narrative in the competitive EV market.
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