Lucid Group (LCID 6.36%) has disappointed many investors since its public debut in July 2021. The maker of luxury electric sedans went public by merging with a special purpose acquisition company (SPAC), and it opened at $25.24 on its first day.
Its stock more than doubled to its record closing price of $55.52 just four months later, but it now trades at about $3 a share. Let's see why Lucid's stock crashed and burned, and if it's worth buying as a contrarian play on the cooling EV market.
Image source: Lucid.
A history of overpromising and underdelivering
Lucid attracted a lot of attention because it was led by Tesla's (TSLA +7.57%) former chief of engineering Peter Rawlinson, who previously oversaw the development of the Model S. Its first vehicle, the Air sedan, directly competes against the Model S.
Prior to going public, Lucid claimed it could deliver 20,000 vehicles in 2022, 49,000 vehicles in 2023, and 90,000 vehicles in 2024. But in reality, it only delivered 4,369 vehicles in 2022, 6,001 vehicles in 2023, and 10,241 vehicles in 2024.
Lucid broadly missed its own expectations as it grappled with supply chain constraints, macro headwinds, tougher competition, and the delayed launch of its Gravity SUV from 2023 to late 2024. It also repeatedly cut its prices, which indicated it was struggling to lock in higher-end consumers in the increasingly crowded EV market.
NASDAQ: LCID
Key Data Points
Relying on Saudi Arabia to drive its expansion
Lucid is still struggling to scale up its business, but it had $5.16 billion in liquidity at the end of the third quarter of 2024. It also raised another $1.75 billion in a stock offering last October, and it expects to have a "sufficient financial runway into the ramp of the Lucid Gravity and well into 2026."
The Saudi Arabian government also owns more than 60% of Lucid's shares through its Public Investment Fund (PIF). The Saudi Arabian government already funded the construction of Lucid's new plant in Saudi Arabia, which opened in September 2023, and it agreed to buy 100,000 of Lucid's vehicles over the next decade. That support could prevent Lucid's coffers from running dry as it tries to expand its wobbly business.
But is Lucid's business model sustainable?
Lucid believes it can gradually ramp up its production and deliveries, but it's still tiny compared to Tesla, which delivered 1.79 million vehicles in 2024. It's unclear if Lucid can ever break out of its niche and significantly increase its deliveries.
Lucid plans to keep expanding the capacities of its AMP-1 plant in Arizona and AMP-2 plant in Saudi Arabia, but there simply might not be enough demand for all of its new vehicles. Analysts expect its annual revenue to nearly quadruple from 2024 to 2026, but they also expect it to post annual net losses between $2 billion and $3 billion every year.
|
Metric |
2024 |
2025 |
2026 |
|---|---|---|---|
|
Estimated revenue |
$786M |
$1.63B |
$2.88B |
|
Estimated net income |
($2.98B) |
($2.90B) |
($2.31B) |
Data source: Marketscreener. M = millions; B = billions.
Lucid's near-term growth will likely be driven by its rising Gravity shipments in 2025 and its launch of a cheaper mid-size SUV (rumored to be called "Earth") in 2026. Those new vehicles might widen its moat against Tesla and other EV makers.
Lucid won't go bankrupt anytime soon, but it's increased its number of shares by 86% since its public debut with its high stock-based compensation and secondary offerings. But on the bright side, its insiders were net buyers over the past 12 months -- and the warmer sentiment suggests its business might grow rapidly again as the EV market stabilizes.
Its stock looks cheap, but it might not be a bargain yet
With an enterprise value of $7.97 billion, Lucid trades at 5 times its projected sales for 2025. That might make it seem cheaper than Tesla, which trades at 11 times this year's sales, but Tesla has already scaled up its business and is consistently profitable. So for now, we can't consider Lucid to be a bargain yet. Investors who are interested in buying it as a turnaround play should probably wait for it to post its fourth-quarter report on Feb. 25 before buying shares.
