A flurry of news over the past month has led to a run in the stock of Lucid Group (LCID -5.29%). The company delivered its first vehicles with much fanfare on Oct. 30, and the successful initial public offering (IPO) of competitor Rivian Automotive less than two weeks later ignited a second surge in electric vehicle (EV) names, including Lucid.
Many investors took some profits from Rivian stock after its spike. Its shares are down 35% from recent highs. But while Lucid shares have soared more than 90% in just the last month, the stock has held those gains, causing some investors to wonder if it's too late to buy Lucid.
Image source: Getty Images.
Off to the races
It may not have been a true race, but Lucid management tried to maximize the fanfare of its initial $169,000 Air Dream Edition customer deliveries at the end of October with a literal rally. The aim of the drive through a scenic California route was to show off the cars and the technology. But what really caught investors' attention was the subsequent award for Lucid's luxury sedan as MotorTrend's 2022 Car of the Year. That award has put Lucid in good company with some impressive past winners.
The hype generated by its initial deliveries helped Lucid to some extent. Reservations for its other three Air models increased by 30% in the first six weeks of the fourth quarter. But that was off of a low base, bringing its total to just above 17,000. And the surge in the stock brought the company's market cap to $85 billion, which won't be justified by any near-term sales volume. So what investors buying Lucid stock now must be looking at is the potential of what comes next.
The Air and beyond
Lucid believes its current level of sales is just a drop in the bucket. The company said in a July 2021 presentation that it expects sales to exceed $2 billion in 2022. Beginning in 2023, the company plans to introduce its next vehicle, the Gravity luxury SUV. It hopes to be close to $10 billion in revenue for 2024, with plans for future new models after that.
But investors, and the company itself, also expect Lucid's technology to be a future driver of growth. When the first long-range Air models were given a battery range rating of 520 miles by the U.S. Environmental Protection Agency (EPA), it was an indication that Lucid could back up the technology advantage that its management has touted as a differentiator.
Its in-house technologies include the battery pack, drivetrain, motors and transmission, software, and advanced charging features. While not included in its shorter-term revenue projections, Lucid hopes it can apply its proprietary engineering and technology for future growth opportunities in applications beyond its own manufactured vehicles, and even into energy storage systems.
Production of the Gravity SUV is planned to begin by the end of 2023. Image source: Lucid Group.
What investors should watch
For now, investors who believe there can be market-beating returns from the stock should continue to keep their eyes on Lucid's automotive progress. To achieve its projected sales estimates, the company will have to begin selling its vehicles internationally next year. It has plans to begin deliveries in Europe, the Middle East, Africa, and China over the next two years.
Lucid is well capitalized, ending the third quarter with $4.8 billion in cash. It will utilize some of that to expand its Arizona manufacturing facility in a second phase of construction. At this point, it all comes down to execution and how Lucid's technology holds up against constantly evolving competition. But if it successfully progresses with its development plans, the recent run in shares doesn't make it too late to invest in Lucid.
