Lucid Is a Penny Stock

Investing

Published: January 24, 2025 9:45 am

Lucid Group Inc. (NASDAQ: LCID) stock has dropped to $2.72 per share. The company went public in the summer of 2021 via a merger with a special purpose acquisition company (SPAC). On Lucid’s first day of trading, which was July 26 of that year, shares hit $29.02 apiece. Its stock hit a high of $56.70 on November 30 of that year. The current price is less than 5% of what it was at that peak.

24/7 Wall St. Key Points:

Lucid Group Inc. (NASDAQ: LCID) stock is less than 5% of what it was at that peak.
The primary concern about this struggling electric vehicle maker is whether it can stay in business.
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Is Lucid Doomed?

Lucid electric vehicles — Can Lucid stay in business?

The primary concern about Lucid is whether it can stay in business. The Trump administration plans to eliminate the tax credit for electric vehicles (EVs). The credit is a major incentive for people to choose EVs over gasoline-powered cars.

While Lucid’s sales have improved slightly, it produced only 3,386 EVs in the most recent quarter. That was up from 2,391 in the previous quarter. One challenge the company has is how expensive its vehicles are when the industry is trying to produce cheaper EVs to restart the difficult U.S. market. The Lucid Air Touring’s base price is $75,000 after credits.

In August, Lucid got a financial lifeline from a fund that Saudi Arabia’s government controls. Ayar Third Investment, an affiliate of the Public Investment Fund, bought $750 million of convertible preferred stock through a private placement and a $750 million unsecured delayed draw term loan facility. That failed to trigger a major run-up in the stock.

Lucid’s profit and loss statement remains a disaster. In the most recent quarter, revenue was $200 million, up from $138 million in the year-ago quarter. It lost $975 million, compared to a loss of $631 million in the prior year.

Lucid’s primary competitor is Tesla, which is true of every company that sells EVs in the United States. However, legacy car manufacturers have started to make inroads, despite losses running into the billions of dollars. GM, Ford, and Hyundai each had about 10% of the U.S. EV market in 2024. Each has deep pockets and huge dealer networks. Lucid has neither.

For people willing to bet on Lucid’s shares at penny stock levels, the risk is that it drops toward zero.

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