Lucid (LCID 0.41%) posted its second-quarter results after the market close on Aug. 7. The luxury EV maker's revenue rose 55% year over year to $151 million, but missed analysts' estimates by $54 million. Its net loss more than tripled from $220 million to $764 million, or $0.40 per share, and missed the consensus forecast by four cents.
Those headline numbers were disappointing, but Lucid's stock still jumped 12% the following day. That's likely because investors had already set a low bar after the company revealed its lackluster second-quarter production and delivery numbers last month -- so its post-earnings rally merely seems like a sigh of relief instead of an enthusiastic cheer.
Image source: Lucid.
Yet if we pull back the chart further, we'll see that Lucid's stock remains down more than 60% over the past 12 months. Should investors still bet on its long-term turnaround?
What are Lucid's biggest problems?
When Lucid went public by merging with a special purpose acquisition company (SPAC) in 2021, it initially claimed it could produce 20,000 vehicles in 2022 and 49,000 vehicles in 2023. But in reality, it only produced 7,180 Air sedans in 2022. It also postponed the launch of its second vehicle, the Gravity SUV, from 2023 to 2024.
At the end of 2022, Lucid claimed it could produce 10,000-14,000 vehicles in 2023. But in the first quarter, it quietly revised that full-year target to "over 10,000" vehicles.
Lucid produced 4,487 vehicles in the first half of 2023, including 2,314 vehicles in the first quarter and 2,173 vehicles in the second quarter. That sequential slowdown was a red flag, since Lucid now needs to significantly ramp up its production in the second half of the year to exceed its goal of producing at least 10,000 vehicles.
Lucid delivered 2,810 Air sedans in the first half of the year, including 1,406 deliveries in the first quarter and 1,404 deliveries in the second quarter. That sequential dip caused its second-quarter revenue to broadly miss Wall Street's expectations.
Lucid repeatedly blamed its slowdown on supply chain constraints, but the macro headwinds, its own safety-related recalls, and stiff competition from Tesla (TSLA -1.11%) and other EV makers could be exacerbating that pain. Lucid's total reservations had already declined sequentially for two consecutive quarters before the company stopped disclosing that key growth metric in the first quarter of 2023, so it certainly seems like Lucid's ongoing delays are driving away its potential buyers.
Focusing on its liquidity, partnerships, and Saudi Arabia
Lucid ended the second quarter with $6.25 billion in total liquidity, which it claims can last through at least 2025. A lot of that cash came from a $3 billion capital raise earlier this year, which enabled Saudi Arabia's Public Investment Fund (PIF) to raise its stake in Lucid to more than 60%. As part of that deal, Lucid is setting up its first overseas plant in Saudi Arabia, and the Saudi Arabian government plans to buy 100,000 vehicles from the company over the following decade.
Last May, CEO Peter Rawlinson claimed that Saudi Arabia's support would enable Lucid to produce more than 500,000 vehicles annually by 2025, compared to its original goal of achieving that milestone by 2030. That's a bold claim, but investors should look back at Lucid's track record of broken promises before blindly assuming it can hit that lofty goal.
For now, analysts expect Lucid's annual revenue to rise nearly sixfold from $804 million in 2023 to $4.8 billion in 2025 as it narrows its annual net loss from $2.9 billion to $1.5 billion. That's a decent growth trajectory, but it doesn't suggest Lucid can come anywhere close to increasing its annual production by 50 times to pump out half a million vehicles by 2025.
On the bright side, Lucid might still have a future as an EV production partner for other automakers. It recently signed contracts worth more than $450 million to provide powertrain and battery system technologies to Aston Martin (AML 0.46%), and other high-end automakers might follow that lead if Lucid actually starts shipping those products. However, it also seems doubtful that Lucid can fulfill all of those orders when it's still struggling to produce enough vehicles on its own.
Its stock is still too richly valued
Lucid still trades at 20 times this year's sales. Peter Rawlinson's former employer, Tesla, which has already ramped up its production and is firmly profitable, trades at just eight times this year's sales. In other words, a lot of speculative growth is still baked into Lucid's valuations. Therefore, its stock could still easily be cut in half if it fails to meaningfully ramp up its production this year. So for now, investors should steer clear of Lucid and stick with more promising growth stocks instead.
