Growth investors are always looking for multibagger stocks. After all, who doesn't like the idea of buying a stock and seeing the investment multiply in some years? But before investing in any stock, it is important to understand the associated risks. The key is not to avoid risk altogether, but to take calculated risks, and understand what you are buying well.
Electric vehicle (EV) manufacturer Lucid Group's (LCID -3.73%) stock rose significantly in October, and the rally has continued this month. The company started deliveries of its first cars in October. What's more, Lucid's cars offer longer range than any other EV in the market right now. So, can the stock generate multibagger returns in the long run? Let's discuss that next.
Fascinating product range
The top factor that works in Lucid's favor is, of course, the superior performance of its cars. In its top-line trim, Lucid Air offers a range of 520 miles -- roughly 100 miles more than Tesla's (TSLA 0.91%) Model S. An electric vehicle's efficiency -- miles per kWh of battery -- is considered as the ultimate measure of its EV technology. This ultimately helps it in achieving longer range as well as faster charging for the equivalent power charger. Lucid looks like a clear winner here. If you are wondering how the company accomplished this feat, there are two key factors behind it.
First, Lucid's battery technology has been refined over years. The company has more than 10 years of experience in the design, engineering, and manufacturing of batteries. Lucid's batteries power all teams in the world's premier EV racing series. The company used this know-how in Lucid Air's battery packs.
The second reason behind Lucid's impressive product performance is the experience of the company's management team. Peter Rawlinson, Lucid Group's CEO and CTO, brings over 30 years of auto industry experience. Rawlinson was also the Chief Engineer of Tesla's Model S. The rest of the management team also has rich experience in auto, EV, and technology sectors.
Lucid plans to offer the Lucid Air at various price points -- ranging from $169,000 for its Dream Edition to $77,400 for Lucid Air Pure. The company's next planned model is an SUV named Gravity. Lucid expects to start production of the SUV at the end of 2023.
Lucid Group plans to deliver 20,000 vehicles in 2022 that could help it generate $2.2 billion in revenue. By 2030, it anticipates run-rate production of more than 500,000 units. Overall, the company's long-term growth plans look solid.
Can the EV stock generate multibagger returns?
Lucid has just started its car deliveries, and it might be too early to say how much the company will be able to grow in the long run. Lucid will report third quarter results after the bell on Monday, and investors should get more insights into the company's near and longer-term plans. EV is an extremely competitive space, and the company's eventual success depends on several factors, including its ability to make timely deliveries, market demand and acceptance of its products, competing products from other automakers, and so on.
On the positive side, Lucid's impressive models, experienced management team, technological strength, superior battery performance, and vertically integrated production inspires confidence in its long-term success. I'm more inclined toward the positives right now and believe in the company's long-term growth.
In 10 years, Lucid plans to sell 500,000 EVs, about the total number of vehicles that Tesla sold in 2020. For sure, this won't be an easy target for Lucid. But even assuming a delivery number much less than this -- and further assuming that the stock won't reach Tesla's gigantic valuation -- it is fair to believe that Lucid stock could rise to at least $180 in 10 years. That's a conservative one-fourth of what the price would have been for a price-to-sales ratio of 25, which is the ratio Tesla sports right now. If that happens, an amount of $250,000 invested in Lucid stock today could generate a million dollars for you in 10 years, or possibly less.