Share prices of Lucid Group (LCID -0.26%) are up a staggering 38% in the last week. While some of the gains could be correlated with Tesla passing $1 trillion in market cap for the first time in its history, the bigger news for electric vehicle (EV) maker Lucid is that it's set to deliver the first wave of Lucid Air Dream Editions to customers this weekend.
The company's critics will point to its $44 billion market cap as being extremely overvalued considering it is only now producing and delivering cars. While it's true that Lucid has high expectations, even for a growth stock, the company deserves credit for hitting its goals on time. Here's a look at where Lucid stands today and what it needs to do to fulfill next year's promises.
Staying true to its word
Lucid showcases the importance of separating a stock's price swings from how the company is performing. While its stock price has been all over the place this year, rising as high as $64.86 a share and falling as low as $9.60, the company itself has been a pinnacle of consistency.
Lucid spent much of the first half of the year tweaking its manufacturing process and build quality of the Air Dream Edition, growing reservations, and opening showrooms and service centers. It successfully expanded its Arizona manufacturing facility to a capacity of 34,000 vehicles, which is more than enough to produce its goal of 20,000 Lucid Airs in 2022.
In May, it announced that final adjustments on the Lucid Air were going well and that final quality assurance would take place the following month. In June, Lucid completed a preproduction run of 89 vehicles on time. It then merged with a special purpose acquisition company (SPAC) called Churchill Capital IV in July, netting $4.4 billion in cash after expenses.
In mid-September, Lucid was crowned the king of range after receiving official Environmental Protection Agency (EPA) ratings that exceeded its initial forecasts. In late September, Lucid announced it had begun vehicle production at its Arizona plant, which was on schedule with its goal to enter production in the second half of 2021. It also announced reservations were now over 13,000 compared with just 9,000 in May. In mid-October, Lucid opened a store in Vancouver as part of its goal to open 20 retail and service locations by the end of the year, as well as to continue growing international reservations.
On Oct. 24, Lucid Motors tweeted a picture of a car carrier trailer transporting six lucid Air sedans -- a tease that customer deliveries were starting. Later in the week, on Oct. 27, it made the news official, announcing it would deliver the first Lucid Air Dream Edition vehicles to customers before October's end.
In sum, Lucid has done just about everything it said it was going to do this year on time, which is important for a young company trying to prove itself, much less directly challenge Tesla for electric vehicle stardom. It's still early, but the Lucid Air Dream Edition has so far lived up to the hype, both in getting the EPA stamp of approval for its specs and receiving favorable reviews from publications such as MotorTrend, Car and Driver, and Road & Track.
In its Oct. 27 press release, Lucid said it plans to deliver 520 limited-run Lucid Air Dream Editions that feature a 118-kilowatt-hour battery pack, 1,111 horsepower, and 520 miles of range, followed by Lucid Air Grand Tourings, the company's second-most expensive trim. In 2022, the company plans to mass-produce and deliver the Lucid Air Touring and Lucid Air Pure, two lower-end models that are meant to be more price-competitive with other luxury cars.
In addition to the deliveries, Lucid will also be hosting a Dream Delivery event in California on Oct. 30 -- all covered on the company's social media channels.
Over the next few months, Lucid needs to continue to increase its rate of production, successfully manufacture and deliver lower-end trims of the Lucid Air, and receive positive feedback that allows it to grow reservations without spending a lot on advertising. Similar to 2021, Lucid has made big promises for 2022. All eyes will be on the company's ability to scale production, as well as make progress on the Lucid Gravity SUV -- all the while working toward becoming profitable over the medium term.
Maintaining an edge over the competition
Lucid's decision to develop and manufacture its powertrain in-house and safeguard its proprietary technology is a good long-term move. With so many up-and-coming competitors in the EV space, as well as legacy automakers increasingly funding EV campaigns, Lucid's technological edge and design are the main factors driving its brand right now. The company expects it has enough cash to last through at least 2022, but it will eventually need to become cash-flow positive or risk diluting its stock by selling additional shares to raise capital.
Despite what you think about Lucid the stock, it's undeniable that Lucid the company is firing on all cylinders and is positioned to finish the year on a high note. Long-term investors know that successful companies tend to share the common trait of good management. The company's management is showing it is capable of developing a car that isn't simply passable, but rather is actually raising the bar so that other companies now have to catch up. If that's a story you can get behind, then there's reason to believe that there's never been a better time to buy Lucid stock -- especially now that it's actually delivering cars.