Over the past year, Lucid Group (LCID) has seen a dramatic 50% drop in its stock value, partly due to weak sales and a continued cash burn. Despite reporting record-breaking delivery numbers in Q2 and securing funds worth $1.5 billion from Saudi-backed Ayar Third Investment Company, the company’s financial health remains in question, and additional liquidity may be necessary within the next 18 to 24 months.
Its dependency on Saudi investment adds further risk, as any potential dip in oil prices or the onset of a recession could result in the Kingdom withdrawing its investment. Given these factors, investors might want to approach LCID with extreme caution.
Lucid Is Building an EV Brand with Saudi Support
Lucid Group is a technology company specializing in designing, engineering, manufacturing, and selling electric vehicles (EVs), EV powertrains, and battery systems. The company also has its proprietary software that it develops in-house for its vehicles.
Despite enthusiasm for the company’s luxury Lucid Air, losses have broadened as the company struggles to sell enough vehicles to become self-sufficient and profitable. The company beat revenue expectations with Q2 revenue of $200.6 million based on delivering 2,394 vehicles, 70.5% more than in Q2 2023. Yet, it incurred net losses of $790.3 million, $25 million more than losses incurred in the same period a year ago, suggesting that the more vehicles it sells, the greater its losses.
Saudi Arabia’s sovereign wealth fund, the Public Investment Fund (PIF), has invested $7.9 billion in the company since 2018, including a recent addition of $1.5 billion. These funds are expected to ensure Lucid’s continued survival through Q4 2025. The PIF seeks to establish Lucid as a leading vehicle manufacturer in Saudi Arabia to leverage its high-end luxury EVs and is financing Lucid’s proposed assembly plants in the country.
However, with less than 20,000 EVs produced and just over 14,000 sold, the return has been subpar. There’s a growing concern among market participants that the PIF may eventually decide to cut its losses, which would significantly impact Lucid’s financial stability and the value of its stock.
Lucid’s Recent Financial Results & Outlook
Lucid Group recently announced its Q2 2024 financial results. Revenue was $200.6 million, beating analysts’ estimates of $182.52 million. The company produced 2,110 vehicles and delivered 2,394, marking a 70.5% year-over-year increase. However, the company experienced a net loss of $790.3 million and reported earnings per share of -$0.29, falling below the analysts’ estimates of -$0.26.
The company closed the quarter with $3.9 billion in cash, cash equivalents, and investments and approximately $4.28 billion in total liquidity.
Management has offered guidance for 2024, aiming for an annual production of approximately 9,000 vehicles while adapting output as necessary to meet sales and delivery requirements. Capital expenditure is projected to be roughly $1.3 billion. The company anticipates having sufficient liquidity until the fourth quarter of 2025, supported by the recent $1.5 billion capital increase.
What Is the Price Target for LCID?
The stock has been on a volatile downtrend, sporting a beta of 2.2 while shedding 85% of its value in the past three years. It trades toward the bottom of its 52-week price range of $2.29 – $6.48, though a recent uptick in price demonstrates mixed technical indicators, such as trading above its 50-day (3.12) and 100-day (3.11) moving averages.
Analysts following the company have taken a cautious stance on the stock. For instance, Stifel analyst Stephen Gengaro recently raised the price target from $3 to $4 while keeping a Hold rating on the shares, noting the Q2 revenue beat and $1.5B in additional funding. Yet, he points out, cash burn remains a concern.
Based on the recommendations and price targets recently issued by ten analysts, Lucid Group is rated a Hold. The average price target for LCID stock is $2.86, representing a potential -9.21% change from current levels.
Bottom Line on LCID
Lucid Group continues battling to grow its operations in the tough electric vehicle market. Despite impressive Q2 delivery numbers and a fresh injection of $1.5 billion, the company’s financial stability appears to be on shaky ground as it registers record losses yearly. The upcoming launch of the lower-cost Lucid Gravity SUV, while offering a beacon of hope for increasing market share, could potentially amplify cash burn concerns. Therefore, caution is the most prudent path for prospective investors.
