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Is Lucid stock a buy now?

Is Lucid stock a buy now?
Elmaz Sabovic

Lucid (NASDAQ: LCID) stock mirrors the rollercoaster ride of the EV industry over recent years. While initially greeted with enthusiasm and positioned to revolutionize the automotive sector, the tide has turned harshly for many EV manufacturers, with some forced to halt operations and others teetering on the brink of collapse.

LCID stock debuted at $25 per share and soared to $55 in 2021. However, at the time of writing, it has plummeted to a mere $2.55, leading many investors to reconsider their positions.

LCID stock price since its IPO. Source: Google Finance
LCID stock price since its IPO. Source: Google Finance

Yet, with a recent 5.81% increase over the past five trading sessions, could Lucid stock stage a recovery and present a buying opportunity for willing traders?

A case against LCID stock

Lucid, known for its Air sedan and plans to introduce the Gravity SUV, faced challenges meeting production targets due to supply chain constraints and market conditions.

Despite projections for significant vehicle production, it fell short, producing only 7,180 vehicles in 2022 and 8,428 vehicles in 2023. 

Falling production and deliveries of Lucid vehicles by quarter. Source: electrive
Falling production and deliveries of Lucid vehicles by quarter. Source: elective

Revenue dipped in 2023 despite a rise in deliveries, while operating losses widened. Analysts forecast a revenue increase in 2024, but concerns linger regarding the company’s turnaround amidst market uncertainties.

A case for LCID shares

Although Lucid’s stock trades below its peak, its financial stability remains intact. Ending 2023 with $4.78 billion in total liquidity, Lucid asserts it can sustain operations through ‘at least’ 2025, especially with the launch of its Gravity SUV. With a manageable debt-to-equity ratio of 0.8, Lucid has the flexibility to raise additional funds.

Moreover, the Saudi Arabian government, holding over 60% of Lucid’s shares through its Public Investment Fund (PIF), is committed to purchasing up to 100,000 vehicles over the next decade. If Lucid faces production challenges, the PIF may intervene to bolster liquidity or increase its stake.

Although scaling up operations may pose challenges, analysts anticipate Lucid to achieve $4.39 billion in revenue by 2026, signifying a robust compound annual growth rate (CAGR) of 95% from 2023.

Final verdict

While Lucid’s current prices may cap its downside potential, concerns persist regarding its history of overpromising and underdelivering, continuous price reductions, and substantial losses. These factors cast doubt on the company’s future prospects and, therefore, LCID shares.

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