Lucid Group (NASDAQ:LCID) shares, like most names in the EV segment, have been under pressure since Trump’s re-election. Despite Elon Musk’s presence, the new administration is expected to be no ally to the EV space, raising concerns about the potential removal of consumer incentives for EV purchases.
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Morgan Stanley analyst Adam Jonas thinks that due to its vehicles’ relatively high average transaction price, the removal of incentives poses a headwind, but it will have a smaller impact on Lucid than on some of its peers.
“Beyond changes to government EV policy,” Jonas goes on to say, “we believe FY25 revenue growth will be dominated by execution related to the Gravity ramp which we expect to reach 6,000 units of deliveries, driving >50% volume growth for the company next year.”
Basically, with liquidity sorted into FY26, Jonas thinks Lucid stock’s trajectory will more likely be down to the success of the Gravity SOP (start of production)/ramp and the company’s ability to demonstrate “substantial improvement in incremental margins and operating leverage.”
Having raised more than $13 billion in equity over the past four years, Jonas considers FY25 a “critical opportunity” for Lucid to showcase its ability to deliver “higher volume product to market with significantly improved contribution margin.” While the company is still expected to operate at a loss, Jonas believes Lucid’s adjusted EBITDA could start to show meaningful progress in FY25, with a much more substantial reduction in cash burn anticipated in FY26.
The company has not provided a specific capex outlook for next year, however, Jonas expects relatively flat spending at around $1 billion. This assumption factors in reduced year-over-year spend in Arizona and “moderated spend” on Plant-2 (AMP) in Saudi Arabia, as key facilities like the paint shop and stamping operations have been completed. Additionally, Jonas anticipates that capital investment support from the local government will help lower Lucid’s “incremental capex burden” in the coming year.
Jonas has been a long-term Lucid bear and if that all sounds like the analyst is finally warming to the luxury EV maker, that is not the case just yet. While the company’s Q3 results were better than expected, Jonas says they “did not materially change the narrative or our assessment of risk/reward for LCID shares.”
As such, Jonas keeps his Underweight (i.e., Sell) rating on Lucid shares intact, along with a $3 price target. Ironically, this target implies a ~43% upside from current levels, creating a disconnect in his stance. (To watch Jonas’ track record, click here)
It’s a similar story amongst many of Jonas’ colleagues. On the one hand, the stock only claims a Hold (i.e. Neutral) consensus rating, based on a mix of 6 Holds, 2 Sells and 1 Buy. However, the $2.99 average target implies shares will gain 42% in the months ahead. It will be interesting to see whether the analysts upgrade their ratings or lower price targets over the coming months. (See Lucid stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
