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Why Lucid Stock Popped Today

By Rich Smith – Dec 30, 2021 at 8:07AM

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Citi gives Lucid a buy rating.

What happened

Shares of fast-growing electric vehicle (EV) stock Lucid Group (LCID -1.04%) had gained 6% as of 12:05 p.m. ET on Thursday.

In a report just out this morning, Citigroup (NYSE: C) announced it is resuming coverage of the EV start-up with a buy rating and a $57 price target, as reports.

Stock up glowing green arrow climbs on a stock screen.

Image source: Getty Images.

So what

If Citi is right about its target price, this implies Lucid stock could gain more than 46% in 2022.

Lucid EVs have "a best-in-class blend of range, performance, charging dynamics and price," Citigroup says. And while Tesla (TSLA 0.72%) EVs have been on the market for some years already, Citi said that the EV industry is still relatively young enough that one can consider Lucid "early to the premium EV market."

Now what

Investors are clearly excited by the endorsement from Citigroup today. Yet even so, Citi placed some caveats on its buy rating that shouldn't be overlooked.

"Lucid is a pre-revenue company," it warns, meaning that not only does the company have no profits upon which to hang a price-to-sales valuation, it doesn't even have sufficient sales to value it on price-to-sales just yet.

To reach its target valuation, Citi says, Lucid "needs to successfully navigate production ramp-ups" and get itself at least enough revenue to attach a P/S ratio to the stock. Until Lucid succeeds at that, Citi says that it must "rate the stock High Risk."

Caveat investor.

Citigroup is an advertising partner of The Ascent, a Motley Fool company. Rich Smith has no position in any of the stocks mentioned. The Motley Fool owns and recommends Tesla. The Motley Fool has a disclosure policy.

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