To The Moon

Market forces rained on the parade ofLucid Group, Inc.($Lucid Group Inc(LCID)$ ) shareholders, when the analysts downgraded their forecasts for this year. Both revenue and earnings per share (EPS) estimates were cut sharply as the analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.

After the downgrade, the six analysts covering Lucid Group are now predicting revenues of US$1.3b in 2022. If met, this would reflect a substantial improvement in sales compared to the last 12 months. The loss per share is anticipated to greatly reduce in the near future, narrowing 57% to US$1.23. However, before this estimates update, the consensus had been expecting revenues of US$2.0b and US$1.12 per share in losses. So there's been quite a change-up of views after the recent consensus updates, with the analysts making a serious cut to their revenue forecasts while also expecting losses per share to increase.

NasdaqGS:LCID Earnings and Revenue Growth March 7th 2022

The consensus price target fell 15% to US$34.75, implicitly signalling that lower earnings per share are a leading indicator for Lucid Group's valuation. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on Lucid Group, with the most bullish analyst valuing it at US$50.00 and the most bearish at US$12.00 per share. So we wouldn't be assigning too much credibility to analyst price targets in this case, because there are clearly some widely differing views on what kind of performance this business can generate. As a result it might not be possible to derive much meaning from the consensus price target, which is after all just an average of this wide range of estimates.

Of course, another way to look at these forecasts is to place them into context against the industry itself. The analysts are definitely expecting Lucid Group's growth to accelerate, with the forecast exponential annualised growth to the end of 2022 ranking favourably alongside historical growth of 582% per annum over the past year. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 22% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Lucid Group to grow faster than the wider industry.

The Bottom Line

The most important thing to take away is that analysts increased their loss per share estimates for this year. Unfortunately, analysts also downgraded their revenue estimates, although our data indicates revenues are expected to perform better than the wider market. After such a stark change in sentiment from analysts, we'd understand if readers now felt a bit wary of Lucid Group.

Source: Simply Wall St