The luxury electric sedan maker Lucid (LCID 0.41%) went public by merging with a special purpose acquisition company (SPAC) in July 2021. Its stock opened at $25.24 on the first day of trading and more than doubled to an all-time high of $55.52 four months later. The bulls initially embraced Lucid because it was led by Tesla's (TSLA -1.11%) former chief vehicle engineer Peter Rawlinson and aimed to produce 20,000 vehicles in 2022 and 49,000 vehicles in 2023.
Unfortunately, Lucid only produced 7,180 vehicles in 2022, and it expects to produce 8,000-8,500 vehicles in 2023. It also issued several recalls, delayed its long-awaited Gravity SUV, and slashed its prices. All of those setbacks caused Lucid's stock to plummet to about $4 a share. Can Lucid's stock recover from that disastrous decline over the next 12 months?
Image source: Lucid Group.
Why did Lucid miss its pre-merger targets?
Lucid mainly attributed its sluggish production rates to the persistent supply chain constraints across the automotive sector over the past two years. Those delays caused many of its customers to abandon their reservations for its Air sedan. Its reservations hit a peak of 37,000 vehicles in the second quarter of 2022, but they slipped to just 28,000 by the end of the year. It quietly stopped disclosing that key metric in the first quarter of 2023.
Competition from other higher-end EV makers could also be throttling Lucid's growth. Tesla, which sparked a fierce pricing war across the EV market with its steep price cuts over the past year, produced 1.37 million vehicles in 2022 and 1.35 million vehicles in the first nine months of 2023. Tesla's production of its own first-party chips also insulated it from many of the supply chain headwinds that disrupted smaller EV makers like Lucid.
At the end of 2022, Lucid predicted it could produce 10,000-14,000 vehicles in 2023. But it cut that guidance to "over 10,000" vehicles in the first quarter, then reduced that outlook again to just 8,000-8,500 vehicles in the third quarter. It also originally planned to roll out its Gravity SUV in 2023, but that launch has now been postponed until 2024.
An even more outrageously bullish estimate for 2025
Lucid is clearly struggling to ramp up its production. But last May Peter Rawlinson claimed the company could produce over 500,000 vehicles annually by 2025. Rawlinson claimed Lucid could achieve that lofty goal with the backing of the Saudi Arabian government, which owns more than 60% of Lucid's shares through its Public Investment Fund (PIF). The Saudi Arabian government also agreed to purchase 100,000 vehicles from Lucid over the following decade.
However, some simple math suggests the company can't possibly produce half a million vehicles annually by 2025. Lucid's AMP-1 plant in Arizona has an annual production capacity of 34,000 vehicles, and it's upgrading its capacity to 90,000 vehicles ahead of the launch of its Gravity SUV in 2024. It recently opened the first phase of its AMP-2 plant in Saudi Arabia, but the new facility can only produce 5,000 vehicles annually. It expects the opening of the completed manufacturing facility by the "middle of the decade" to boost its annual production capacity in Saudi Arabia to 155,000 vehicles.
So even in a best-case scenario with both AMP plants operating at full capacity, it would only produce 245,000 vehicles in 2025. Unfortunately, Lucid's long streak of broken promises suggests those estimates will also still be too optimistic.
Where will Lucid's stock be in a year?
For 2023, analysts expect Lucid's revenue to rise just 4% to $635 million as its net loss widens from $2.6 billion to $2.9 billion. But for 2024 they expect its revenue to jump 119% to $1.39 billion as it slightly narrows its net loss to $2.5 billion. Those optimistic estimates hinge on Lucid overcoming the supply chain issues for its Air sedan, successfully mass producing its Gravity SUV, and expanding the capacity of its two AMP plants.
With an enterprise value of $8 billion, Lucid might seem reasonably valued at 6 times next year's sales. Tesla, which is expected to grow its revenue by 22% in 2024, also trades at about 6 times that estimate. But there's a big difference: Tesla has successfully scaled its business and is firmly profitable, while Lucid is still burning cash and hasn't proven it can actually achieve any of its ambitious long-term goals.
On the bright side, Lucid's insiders have been net buyers of its own stock over the past 12 months. That warmer insider sentiment suggests the company might surprise the bears -- who were still shorting 10% of its outstanding shares at the end of October -- by finally breaking its production bottleneck and delivering more vehicles.
Lucid isn't down for the count yet, but I don't think its battered stock will recover within the next 12 months. Instead, it will likely continue to underperform the market as it struggles to ramp up its production and maintain its pricing power.
