What happened
Shares of luxury electric car start-up Lucid Motors (LCID -0.33%) dropped precipitously in early trading Thursday morning -- then made up all their losses and even began trading in the green, before losing it all once again (sigh), and finally closing the day down 2.6%.
You can probably blame Morgan Stanley for all of that.
Image source: Getty Images.
So what
Investment bank Morgan Stanley, you see, chose today to put out a report on a survey of its clients' opinions of various EV stocks. And as it turns out, the survey shows that 87% of its customers prefer to own Rivian (RIVN -2.60%) stock over its rival Lucid Motors (LCID -0.33%).
According to the bank, "conservative expectations" for Lucid's ability to sell a whole lot of $170,000 luxury electric sedans suggest that an appropriate price target for Lucid would be $16 by year end. In fact, Lucid currently costs closer to $27 a share, however, which implies that the stock has roughly 40% downside risk in it -- which is why Morgan Stanley rates Lucid stock underweight (sell).
Now what
Does that sound too harsh?
Well, consider that while Lucid expects to begin significant volume production this year, and to sell as many as 20,000 electric vehicles, currently the stock's trailing-12-month revenue sits below $5 million -- and its price-to-sales ratio is a somewhat mind-boggling 11,000-to-1.
And granted, that number could come down quite dramatically if Lucid succeeds in selling 20,000 electro-buggies at $170,000 a pop this year. Still, the resulting P/S on that calculation still comes to more than 16.0 -- versus Ford and General Motors for example, both of which trade for a price-to-sales ratio of 0.6.
Looked at that way, I can't help but agree with Morgan Stanley: Lucid stock simply costs too much.
