With shares down by a staggering 92% from an all-time high of $58 reached in early 2021, Lucid Motors' (LCID 0.41%) stock has been a poor bet for its early shareholders. And that's especially compared to the electric vehicle (EV) industry leader Tesla, which has risen 121% in 2023 alone. But with Tesla's valuation getting uncomfortably high, it makes sense for investors to shop around for potential deals in the market. Let's explore whether or not Lucid is finally worth a buy.
What went wrong for Lucid?
Founded by former Tesla executives in 2007 before hitting the market through a SPAC merger in 2021, Lucid was once considered a viable competitor to the current market leader. Compared to Tesla's Model S, its flagship Sedan, the Lucid Air, offers more speed, range, and an arguably more traditionally luxurious design. But unfortunately for Lucid, these advantages have not materialized into sustainable shareholder value.
The problem has worsened in the near term because of macroeconomic challenges like high interest rates, which make it harder for consumers to finance their car purchases. Lucid's revenue fell 29% year over year to $137.8 million because of lower production and deliveries.
Falling revenue is a very alarming situation for a growth-oriented company. To make matters worse, this can't be blamed solely on macroeconomic factors because Tesla managed to grow its sales by 5% in its corresponding period while Rivian grew a whopping 149% despite facing the same conditions. Even though it is offering attractive and well-differentiated cars, Lucid seems to have a problem with demand.
What could the future hold?
Lucid's management has several strategies to fix this problem. For starters, the company aims to expand its product lineup with new offerings such as the Gravity, a new luxury SUV set to enter production in late 2024, and the recently released Sapphire, which is perhaps the fastest production sedan ever created. New product launches could broaden Lucid's consumer appeal while expanding consumer awareness of its high-performance brand.
Lucid is also leaning into its connection with Saudi Arabia, where it opened its first international manufacturing facility with an annual capacity of 5,000 cars in September.
Image source: Getty Images.
Saudi Arabia aims to become a hub of electric vehicle production and sees Lucid as a partner in this goal. In 2022, the oil-rich kingdom signed a deal to purchase up to 100,000 Lucid EVs over the next 10 years. And it has financially supported the automaker through equity investments, such as a $1.8 billion stock purchase in June 2023. The Saudi government owns around 60% of Lucid's shares through its Public Investment Fund, which means the country is highly incentivized to ensure the company's success.
Is Lucid a better buy than Tesla?
Lucid is a company I want to like. Its cars are beautiful. And it occupies a luxury-focused niche in the EV market that may become increasingly neglected as Tesla moves forward with its mass-market strategy. Further, the Saudi connection may give Lucid a wealthy partner that could help with both its operational expansion and financing.
That said, these perks don't make up for Lucid's poor performance and floundering top-line growth. And with a price-to-sales multiple of 12.3, its shares are actually more expensive than Tesla's, which trade at a top-line multiple of 8.7. Investors may want to wait for more quarters (or even years) of improving data before buying Lucid stock.
