Shares of Lucid Group (LCID 2.75%) dropped by as much as 5% Tuesday after an analyst cut his rating on the stock Monday. The negative report on the stock came three weeks after the electric vehicle (EV) upstart reported disappointing third-quarter results.

However, as of 1:30 p.m. ET, Lucid stock had recovered from that early drop and was trading higher by 2.5% for the session. But that buoyancy itself might be a reflection of the fact that the stock has already dropped nearly 10% since the third-quarter report came out, and is off by more than 45% in the past six months.

The demand question

Lucid launched its business relying on market demand for high-end luxury electric vehicles. Its Lucid Air sedans range in price from nearly $80,000 to as much as $250,000. It also counted on the appeal of its EV technology, which delivered high horsepower and a minimum battery range of over 400 miles. But demand for the Air sedan doesn't seem to be panning out.

In its third-quarter update, Lucid only reported revenue of $137.8 million from deliveries of less than 1,500 vehicles. Based on that underperformance, it also lowered its full-year outlook for vehicle shipments.

On Monday, that led Needham senior analyst Chris Pierce to cut his prior buy rating on the stock to a hold. In his note shared by Barron's, Pierce wrote, "Our Lucid downgrade [stems] from demand wariness, despite our bullishness on their technology advantage versus peers."

Lucid's last stand

But Lucid is hoping the launch of its next electric vehicle will help spur its business. The company officially introduced its Gravity SUV after its third-quarter update. That EV is scheduled to be available in about one year, and will also have industry-leading battery technology that will provide a minimum range of about 440 miles on a full charge.

But with a list price approaching $80,000, it will also only appeal to fairly well-off buyers. In his analyst report, Pierce acknowledged he has a positive view of the Gravity. But for investors to have confidence in the idea that Lucid shares will recover, they need to believe there's a large enough audience for that new vehicle. Those who don't should stay away from Lucid stock.