Lucid Group (NASDAQ: LCID) is an American electric vehicle (EV) company based in California. The company CEO, Peter Rawlinson, formerly worked at Tesla (NASDAQ: TSLA) as a chief engineer on the Model S. Given the high-profile share price gains Tesla investors have enjoyed, this has naturally rubbed off on Lucid, providing added investor appeal.
What is Lucid?
Lucid electric cars are at the luxury end of the spectrum and can travel up to 520 miles per charge. That’s 100 miles further than a Tesla. Lucid vehicles start at $77k. Their advantage appears to be in their technological design.
When it comes to Lucid’s car models, its Lucid Air Dream is the company’s most expensive vehicle. Next is its Grand Touring edition, followed by Touring and Pure.
The Lucid car range comes with a compact battery pack to achieve impressive distance.
Lucid went public via SPAC IPO in July 2021. Churchill Capital Corp. IV, known as CCIV, reverse merged with Lucid Motors to become LCID on the NASDAQ.
Why is the Lucid share price crashing?
The LCID share price has fallen 32% year-to-date and is down 57% from its 52-week high. It appears the initial excitement led investors to bid the price up to an unsustainable level. Now that investors are becoming slightly risk-averse, stocks like Lucid are suffering.
How does Lucid make money?
Lucid makes money selling its luxury electric cars. The company is not yet profitable, but Lucid believes profitability is not too far out of reach. The company expects to turn profitable on an adjusted EBITDA basis in 2024, followed by free cash flow positive the following year.
Speaking at its most recent earnings call, Company CFO Sherry House said the team expects to achieve competitive gross margins by mid-decade. Meanwhile, the margins will be squeezed by depreciation, employee training, manufacturing efficiencies etc. As the battery pack is the single most expensive item in the EV, this also affects the margins.
Director, CEO and Technology Officer Peter Rawlinson commented:
“In the future, we will be able to provide a car which is competitive with range, be it 300 miles, 400 miles, whatever, but with a commensurately smaller, proportionately smaller battery pack than the competition because our technology is inherently more efficient.”
LCID Financial Overview and Metrics
P/BV: 9.3
P/S: 144,522.6
Market cap: $45bn
Lucid started its first deliveries in October.
The company had more than 17k reservations by mid-November.
Lucid Q3 2021 Fiscal Year Highlights:
Revenue: $232k
Gross margin: decreased by over 100% due to a $2.7m increase in the cost of revenue.
Cash position: $4.8bn ($4.4bn from SPAC and PIPE plus $173m from warrant redemption)
LCID Stock: $38 Price Target from Guggenheim Securities
Research Analyst, Ali Faghri at Guggenheim Securities, initiated his coverage of LCID stock with a Neutral rating in December. Guggenheim’s bearish target is $12, bullish is $83, and fair value is $38 per share.
MACRO Outlook:
The EV market continues to thrive in the current macro environment. Demand for these vehicles is rising all over the globe, and carmakers are struggling to keep up. According to Statista, the global EV market is expected to rise four-fold to hit $1 trillion by 2026.
Is LCID a good investment?
Several members of Lucid’s leadership team are ex-Tesla staff. This gives them added incentive to outdo the world’s original EV company and the inner drive to succeed. The talent behind Lucid vehicle production is very high, instilling investor confidence.
Lucid has also indicated breaking into the Energy Storage market to provide backup storage for residential, commercial and utility markets. This could significantly boost company profits and staying power, but it’s still early days, and there are no guarantees this will come to fruition.
Lucid cars are stylish and promise EV fans all they could want, particularly when it comes to distance traveled. But the share price was run up so quickly that it’s now going to have to prove its worth before shareholders are likely to see meaningful returns.
There’s plenty of competition in the EV space, and as inflation bites, only those with the best margins will thrive.
For these reasons, Lucid remains a speculative investment.
If you’re interested in EV stocks, why not check out GGPI, the SPAC targeting Volvo’s Polestar.
