What happened
Lucid Group (LCID 4.54%) stock is struggling to find a bottom this year. The once-hot electric vehicle (EV) stock sank even further in March and lost 12.4% in value during the month, according to data provided by S&P Global Market Intelligence.
It's incredible that you can travel farther without having to recharge batteries in Lucid Air Dream Edition than in Tesla's Model S, but you must first have those long-range cars to drive around. Lucid, unfortunately, is facing production hiccups, and those problems are reflected in the stock price's recent performance.
So what
Lucid stock crashed the first day of March after the company said it had delivered only 125 Dream Edition cars in 2021 and "more than" 300 units by February 28 of this year. Investors expected better, as Lucid said last year that it would start deliveries of other models only after delivering 520 Dream Editions.
More importantly, Lucid said it expects to produce only 12,000 to 14,000 EVs in 2022 given the "extraordinary supply chain and logistics challenges" it's facing. Until November 2021, CEO Peter Rawlinson was confident of producing 20,000 units this year.
Image source: Lucid Group.
To be fair, Lucid isn't the only automaker facing supply constraints, and a production cut was expected, but perhaps not a cut as sharp as the one the company announced.
In the days that followed, several analysts downgraded their price targets on Lucid stock. Citigroup analyst Itay Michaeli slashed Lucid's price target to $45 a share from $57 per share on a poor 2022 production outlook and delay of the launch of Gravity SUV to 2024. Citi's price target, though, still represented a massive 55% upside from the previous day's closing price. Morgan Stanley analyst Adam Jonas, on the other hand, lowered Lucid's stock price target to only $12 apiece from $16. Lucid is currently hovering around $25 a share.
As the days passed, investors in Lucid found more reasons to worry after other EV makers hinted the supply woes were indeed severe and unlikely to end anytime soon. Even a legacy automaker like General Motors shut down a plant recently for two weeks as it ran out of semiconductor chips. Chaos also ruled key raw material markets. The price of nickel, for example, surged 250% within hours, even forcing the London Metal Exchange to halt trade. Nickel is a key input used in lithium-ion batteries.
Now what
Lucid is evidently struggling to ramp up production, but all's not lost. Lucid confirmed it is setting up its first production plant outside the U.S. in Saudi Arabia, with construction expected to start in the first half of this year. At full capacity, the plant should be able to produce 150,000 vehicles.
Lucid also opened its second showroom in Canada in March at Toronto's premier shopping center, teamed up with Electrify Canada to offer customers access to its public EV charging network, and said deliveries in Canada will begin this spring. Lucid also announced it'll integrate semiconductor giant Nvidia's DRIVE Hyperion technology into its advanced driver-assistance system. The Nvidia move should make Lucid's cars more attractive to potential consumers.
NASDAQ: LCID
Key Data Points
Most importantly, Lucid's reservations across all models crossed 25,000 units by Feb. 28, which could bring in sales worth $2.4 billion if all reservations convert into orders. That's not too shabby, and it appears Lucid stock may have limited downside left after its sharp drop in recent months.
