Things You Should Know Before Buying Lucid Stock

$Lucid Group Inc(LCID)$ a luxury electric vehicle (EV) manufacturer, has been making waves in the automotive industry with its advanced technology and ambitious plans. As the company navigates through a challenging market landscape, investors and analysts are closely watching its performance and future prospects.

Company Overview and Recent Performance

Lucid Group is known for its high-end electric sedan, the Lucid Air, and is preparing to launch its first SUV, the Gravity. The company has positioned itself as a technology leader in the EV space, boasting superior battery efficiency, longer range, and faster charging capabilities compared to many competitors.

In the third quarter of fiscal year 2024, Lucid reported revenue of approximately $200 million, up from $138 million in the same quarter of the previous year. However, the company continues to face significant financial challenges, with an operating loss of around $771 million and an adjusted EBITDA loss of $613.1 million for the quarter. The negative gross margin of 106% remains a concern for analysts and investors alike.

Key Points

Lucid's stock has fallen over 90% from its 2021 heights.

The company's first EV has received rave reviews, and its second is due by the end of 2024.

But Lucid has burned a lot of cash, and it'll need a lot more to get to profitability.

Lucid stock has had quite a ride since its debut. It peaked at around $58 per share in 2021, before production of the company's EVs got underway in earnest. And while the company's Air luxury sedan has received rave reviews, its sales have been underwhelming and like many other electric vehicle stocks, its share price has fallen over 90% from those lofty 2021 heights.

But where do things stand for Lucid now, in 2024? If you like the car and you've thought about buying the stock while it's cheap, there are some things you should know.

How does Lucid's EV technology compare with that of its rivals?

Simply put, Lucid stacks up well against the competition.

The company claims to offer the lowest cost battery pack per mile of range in the business. It's a fair claim: Even the most basic $70,000 version of the Air comes with 410 miles of EPA-estimated range, more than Tesla offers in its similarly sized Model S.

Move up to the Air Grand Touring, starting around $109,000, and you'll get an estimated 516 miles of range along with a whopping 819 horsepower and a ton of high-tech luxury features. And all versions of the Air can add 200 miles of range in less than 20 minutes at a 350-kilowatt fast charger.

Who is Lucid's biggest investor?

Lucid's biggest investor by far is Saudi Arabia's sovereign wealth fund, called the Public Investment Fund or PIF. PIF has invested a total of $6.4 billion in Lucid since 2018, including $1 billion in March. It currently owns about 60% of the automaker.

The Saudi government has supported Lucid in other ways. In 2022, its Ministry of Finance agreed to buy at least 50,000, and possibly as many as 100,000, vehicles from Lucid over the following 10 years with deliveries expected to ramp up significantly in 2025.

How much demand has there been for the Lucid?

Lucid's sales have consistently fallen short of expectations. The Air is a superb EV, but the market for six-figure sedans, electric or otherwise, is pretty thin, and sales haven't materialized in the numbers that Lucid and its early investors hoped to see.

But what Lucid really needs to get to profitability is a lower-priced midsize model. That won't arrive until late 2026 at the earliest, Lucid said in May.

But all of that raises an important question..

Does Lucid have enough cash to get to profitability?

At the moment, the answer is NO.

Lucid needs more cash!

Lucid had $5 billion on hand as of the end of March. It said in May that should be enough to launch the Gravity and keep the lights on into the second quarter of 2025. But there's not much chance Lucid will turn a profit before production of the future midsize model ramps up and that won't happen before 2027, even if we're optimistic.

Clearly, Lucid will need more cash. That has been a theme throughout its history: As I mentioned, it has already raised $1 billion in 2024, on top of the $3 billion it raised in May 2023, the $1.5 billion it raised in December 2022, and on and on.

PIF was a major participant in all of those funding rounds, but even the most optimistic investors have to ask: How much more will PIF be willing to invest?

Is Lucid stock a buy?

I will let you guys make your own judgement.

On one hand, Lucid stock is cheap.

But on the other hand, it's cheap for a reason.

Is Lucid stock a good investment?

If you ask me, my answer is No.

It continues to burn capital at an alarming rate and dilute shareholders in the process. Given the circumstances, investors should steer clear of the stock until the company demonstrates significant progress in controlling its expenses and improving its bottom line. 

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