Lucid Group Crowned the EV King of Range, But Is Its Stock a Buy?

Luxury electric vehicle (EV) company Lucid Group (LCID 4.89%) has been getting a lot of positive press, but also its share of negative reporting. The latest headlines speak of a pair of analyst upgrades, one downgrade, and news that the company's Lucid Air Dream Edition Range, the most expensive trim of its luxury sedan, landed an official Environmental Protection Agency (EPA) rated range of 520 miles. 

Let's a closer look at these reports and determine how they might affect the investment thesis of Lucid Group. That could provide clues to whether the company's stock is a buy right now.

Image source: Lucid Group.

The analysts appear to rate Lucid well, mostly

Lucid's latest analyst frenzy began on Sept. 9 when Citigroup gave the company a buy rating and a price target of $28 per share. "In our view, Lucid sports the necessary building blocks to benefit from our EV/Car of the Future thesis -- with leading EV-tech credentials, years of development/experience, brand momentum (per website traffic data) and speed-to-market," said Citi analyst Italy Michaeli. The news came as a reprieve after Lucid stock plunged as early investors cashed out.

Lucid's stock price then fell over 5% on Sept. 14 as Adam Jones, a Morgan Stanley analyst, gave it a price target of $12. 

The very next day, on Sept. 15, Lucid got a buy rating and a $30 per share price target from Bank of America analyst John Murphy. Murphy compared Lucid to both Tesla and Ferrari and called it a "legitimate start-up EV automaker." 

All three analysts praised Lucid's impressive technology. The stark contrast in price targets between Citi and Bank of America versus Morgan Stanley was mainly due to different opinions on how Lucid's competitive advantages will hold up against well-funded and more experienced competition. Price targets should be taken with a grain of salt, as forecasting Lucid's short to medium-term price movement is a speculative endeavor.

The bigger takeaway is that Lucid is getting some serious recognition from Wall Street before reaching mass production on its first car -- a testament to the optimism and premium valuation given to potentially disruptive EV companies.

Lucid takes top honors on EV range

The company's prior projections gave the Lucid Air an estimated range of 503 miles. With 19-inch wheels, the Lucid Air Dream Edition Range delivers 933 horsepower and an even higher range than prior estimates. 

Note: The estimated range is based on EPA scores. Data source: Lucid Group. 

The EPA stamp of approval is nice, but the news was rather unsurprising given a recent test by Lucid CEO Peter Rawlinson and Motor Trend editor Jonny Lieberman. Rawlinson was able to get 517 miles of range out of his Lucid Air Dream Edition Range, which is arguably more impressive than the EPA's theoretical 520-mile estimate because it's a real-world example.

Reacting to the news, Lieberman posted a picture of a Lucid Air on Instagram and captioned the following: 

The 933 hp Dream Edition R has an EPA certified range of 520 miles! That's fairly nuts, and three miles better than the 517 I witnessed. 520 miles is also the longest range ever for an EV. Not bad! The 1,111 hp Dream Edition P? 471 miles. Flipping crazy, if you ask me.

The million-dollar question Lucid investors are asking

Share prices of Lucid Group proceeded to close Sept. 17 up over 8%, giving the stock a three-day gain of 21%. The share price has been extremely volatile since Lucid merged with a special purpose acquisition company (SPAC) called Churchill Capital IV on July 26 -- going as high as $29.03 and as low as $16.12 per share since the merger. 

It may be a contrarian opinion, but there's an argument that all of the recent news pales in comparison to the importance of Lucid's production timetable. The company has gained more recognition for its technology and performance, while at the same time losing some credibility for failing to provide clarity on the Lucid Air rollout.

While Lucid technically hasn't missed its goal of mass production and delivery of the Lucid Air Dream edition before the end of 2021, the likelihood that the rollout will take place in the third quarter is virtually nil. What's more, a late start pushes back Lucid's 2022 goal to produce and deliver 20,000 Lucid Airs. There's a growing chance Lucid will have to adjust next year's forecast the longer it takes for it to reach mass production.

Lowering expectations and barely meeting or missing deadlines weighs on investor patience. Time is of the essence, given that Lucid will likely continue burning cash for a few more years.

Focus on what matters most

The importance of reaching mass production cannot be understated. That being said, Lucid's electric car really is incredible. Given all the press Lucid is receiving, investors should keep a lookout for reservation updates to gauge customer interest in the car. If Lucid's car sells itself, the company will be able to save on advertising and focus on what it does best.

Beginning on Monday, Sept. 27, Lucid will host a production preview week at its Arizona facility that should give investors insight into its manufacturing process, updates regarding the Lucid Air rollout, and maybe even 2022 forecasts. 

Despite all the limelight, the investment thesis behind Lucid hasn't changed one bit. It's still a high-risk, high-reward growth stock with a ton of potential and a lot of unknowns. Risk-tolerant investors could do well to pick up a few shares now or wait to see what next week's event brings.