It's been a rough few weeks for Lucid Group (LCID -0.69%) investors. Its shares have lost roughly 25% of their value since May 20. And yet, analyst predictions for growth have surged this year. Wall Street expects the company to grow sales by 76% in 2025, with another 96% jump in sales expected in 2026.
Has the recent drop created a buying opportunity for this popular EV stock? There are two reasons to be bullish, and one reason to remain cautious.
Expect sales to grow aggressively in 2025 and beyond
The two reasons to get excited about Lucid's future both have to do with growth.
Earlier this year, Lucid started shipments of its Gravity SUV platform. Midsized SUVs are one of the largest, fastest-growing segments of the vehicle market. Getting the Gravity to market, while more expensive and a bit larger than the average midsized SUV, has the potential to more than double sales. Previously, Lucid only offered its Lucid Air model: a high-priced sedan with a limited total addressable market.
The launch of the Gravity SUV platform is the primary reason why Wall Street is so bullish about Lucid's growth in 2025 and 2026. But the true growth should begin in 2027, when the company begins shipments of several new mass-market vehicles.
Tapping the "mass market" is one of the most critical inflection points every EV maker hopes to achieve. Typically, EV start-ups start with high-priced luxury models. These models have less price-sensitive customers, a handy advantage before a business has achieved economies of scale. Plus, these high-end models allow the fledgling company to establish a reputation for quality.
But moving into the mass market -- which in general means launching a vehicle with a price point under $50,000 -- opens the company to millions of new customers. Just take a look at Tesla's sales for proof of how important the mass market is. Its two mass-market vehicles, the Model 3 and Model Y, account for more than 90% of the company's car sales!
Lucid's management apparently has three new mass-market vehicles in the works. If it can succeed in launching them, growth rates could remain in the heavy double digits for many years to come. But there's one glaring area of concern: access to capital.
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One reason to remain cautious about Lucid stock
Earlier this year, Lucid's longtime CEO departed. "We think the departure of Lucid's (LCID) founder, CEO, and CTO Peter Rawlinson is much more consequential than understood by the market," analysts at Bank of America commented at the time. "We now expect product development to stall, consumer demand to be dampened, and anticipate additional funding opportunities could be put at risk."
The final point about funding is perhaps most concerning. Over the past decade, dozens of EV makers have gone bankrupt. The biggest reason: They ran out of money.
Last quarter, Lucid reported $1.9 billion in cash on the balance sheet, yet its net loss over the past 12 months totaled $2.3 billion. Ramping up its Gravity SUV production, as well as production of its new mass-market vehicles, should keep the company in money-losing territory over the next few years at least. This means Lucid will require more capital raises, which Bank of America analysts now believe could be more difficult.
I expect Lucid to survive for the foreseeable future thanks to rapid expected sales growth. But future funding could come at a steep cost to current shareholders due to share dilution. The end result may be a rapid growth business that doesn't actually generate large profits for patient shareholders. Lucid stock is an exciting story, but shares are only a buy if investors find themselves bullish about Lucid's ability to raise additional capital at reasonable prices.
