24/7 Insights
- Wall Street is not entirely optimistic about the prospects for Lucid Group Inc. (NASDAQ: LCID) stock.
- So why has the electric vehicle’s share price rallied lately?
For decades, electric vehicles seemed like the stuff of science fiction. As the technology developed, so too did the excitement. EVs seemed like the wave of the future. Startups proliferated. However, enthusiasm from buyers has waned, particularly in the United States. How can all of those startups survive? What does that mean for the likes of Lucid Group Inc. (NASDAQ: LCID)? Shareholders and would-be investors must be wondering where this stock could be headed.
Why Invest in Lucid?
Since going public in 2021, Lucid stock is down more than 85%. The company says its mission is to create sustainable transportation by making captivating EVs that are centered around the human experience with cars designed to be intuitive, liberating, and efficient. Its luxury vehicles rate well with the likes of Car and Driver and U.S. News & World Report. Shares soared early on, but starting early in 2022, the share price began to dwindle. Investors now have to decide if the best days are in the rear-view mirror or whether the recent run is the beginning of a recovery.
Lucid, the Company
The company designs, engineers, manufactures, and sells EVs, EV powertrains, and battery systems. It also designs and develops proprietary software in-house for Lucid vehicles. Lucid supplies and develops powertrain technology to other automakers, including Aston Martin. So far it has one car in its lineup, the Lucid Air sedan, which it sells directly to consumers through its retail sales network and direct online sales, including Lucid Financial Services. Its Lucid Gravity SUV is expected to roll off the production line this year.
Lucid is based in Newark, California. The company was founded in 2007, and it went public in July of 2021. Competitors include Nio Inc. (NYSE: NIO), Rivian Automotive Inc. (NASDAQ: RIVN), and Tesla Inc. (NASDAQ: TSLA), as well as the major automakers.
Lucid recently posted strong second-quarter delivery numbers, but it also recalled some vehicles and announced layoffs. The company has established a firm presence in the Middle East, and it named a new board member last month.
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Lucid, the Stock
Despite being up around 44% in the past month, the share price is still about 50% lower than a year ago. The S&P 500 is up 22% or so year over year. Note that the $3.06 consensus price target is less than the current share price.
None of the 15 analysts who cover the stock recommend buying shares. Recently, Cantor Fitzgerald reiterated its Underweight rating and Baird reiterated a Neutral rating. About 72% of shares are held by institutional investors. Saudi Arabia’s Public Investment Fund has almost a 60% stake, and Vanguard and BlackRock also hold shares. Note that more than 250 million shares, or more than 29% of the float, are held short.
Wall Street expectations for where the stock goes in the next 52 weeks vary. While at least one analyst anticipates notable upside, the lowest price target indicates a huge drop in the share price. Even the consensus projection signals double-digit percentage downside.
| Low target | $1.75 | −51.1% |
| Mean target | $3.06 | −14.5% |
| High target | $4.00 | 11.7% |
Prospects for Lucid’s survival have been an ongoing concern. Some see the big investment by Saudi Arabia as the only reason Lucid hasn’t yet failed. With the company’s limited lineup of high-priced vehicles in a market that is becoming increasingly crowded, what could Saudia Arabia get out of the deal? Perhaps they take the company private for its technology. Time will tell.
On the other hand, the company has a new SUV coming out soon. And it has reduced prices to help boost demand. If Lucid can make use of whatever time the Saudi investment has bought it to increase sales and ramp up production, perhaps it will be poised to finally take off. At least one analyst sees sizable upside in the coming year. Some Lucid fans are hopeful, perhaps encouraged by the recent rally.
Be sure to grab a copy of our “2 Dividend Legends to Hold Forever” report if you are looking for more great stock ideas.
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