What happened
Shares of Lucid Group (LCID) are crumbling. Just this week, the electric vehicle (EV) stock was down 15.5% as of 12:30 p.m. ET Friday, according to data provided by S&P Global Market Intelligence. That drop in the stock price now means Lucid shares have lost 41.5% already this year, as of this writing.
Blame Lucid's underwhelming outlook for this week's loss.
So what
Lucid's fourth-quarter earnings report was one of the most awaited in the EV industry. The start-up that made Tesla sit up and take notice when it beat the EV leader's range rating was to report its first-ever revenue from EV sales since going public in mid-2021.
Also, investors were eagerly waiting to hear how many cars Lucid had delivered since starting its deliveries in October last year and how fast the company was ramping up production.
Contrary to expectations, Lucid delivered a bummer of a report on the evening of Feb. 28, and its stock crashed by a double-digit percentage next morning.
Here are four areas where Lucid faltered.
- Revenue: Lucid generated $26.4 million in revenue in the fourth quarter, but that missed Wall Street estimates by a huge margin.
- Deliveries: Lucid delivered only 125 units of its debut sedan, the Air Dream Edition in 2021. In October, Lucid said it will build 520 Dream Editions and will start deliveries of its three other trim versions only after delivering all Dream Editions. Investors therefore expected to see much higher deliveries. In fact, even as of Feb. 28, Lucid had yet to deliver almost 200 units.
- Net loss: The net loss more than tripled and crossed $1 billion in the fourth quarter.
- Production: Lucid cut its production estimate for 2022 drastically to a range of 12,000 to 14,000 units from its previous estimate of 20,000 units.
On the positive side, Lucid had secured more than 25,000 reservations as of Feb. 28 across all four models, which can bring in more than $2.4 billion in sales if all reservations are converted into confirmed orders.
Expansion at Lucid's only factory, situated in Arizona, is also on track, and the EV maker announced it'll build a factory in Saudi Arabia this year. This is an important development as it reassures Saudi Arabia's partners in the EV maker. That nation's sovereign wealth fund, the Public Investment Fund, is a major shareholder in Lucid.
Image source: Lucid Group.
Lucid's production cut, though, didn't go down well with investors and analysts who consider Lucid as one of the promising EV start-ups. In the days following its earnings release, at least two analysts downgraded their expectations for the stock, including Adam Jonas from Morgan Stanley, who cut his price target from $16 a share to $12.
Now what
It's worth noting that Lucid has so far stated supply concerns -- and not company-specific problems -- as the major reason it expects low production this year. A crunch in the supply of key inputs like semiconductor chips has hit nearly every automaker hard.
So if you're dumping your Lucid shares in panic, you might want to think again and keep an eye on bigger things like Lucid's reservation numbers and the launch of other models. So far, its reservation growth is strong, and it has also started manufacturing and delivering the Grand Touring trim, a model it says is already seeing strong demand.
