Lucid Motors Stock Price Down 12% Today – Time to Buy LCID Stock?

Lucid Motors (LCID) stock was anyways having a terrible run in 2022 and is down almost 24% for the year. The stock looks set to extend its losses further and is trading down over 12% in US premarket price action today.

Lucid Motors is not the only EV (electric vehicle) stock that has tumbled in 2022 and it has been a broad-based sell-off. All the EV stocks including Tesla have cratered in 2022. What’s the forecast for LCID stock and is it a good buy after the massive crash?

Lucid Motors went public in 2021

Lucid Motors was the most hyped SPAC merger of 2021 and merged with Churchill Capital IV. It was the biggest SPAC merger ever but soon Grab took over the position. Several other EV companies like Nikola, Lordstown Motors, Fisker, Canoo, and Arrival went public through a SPAC reverse merger. Barring Lucid and Fisker, all these companies trade well below the SPAC IPO price of $10.

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EV SPACs have fallen

LCID stock is still comfortably above the SPAC IPO price. However, it trades at around half of its post-merger high of $57.75. The stock had hit its highs after Rivian’s IPO. At its peak, Rivian commanded a market cap in excess of $150 billion which led to a rerating of other quality EV stocks. Since then, Rivian has fallen and now even trades below the IPO price. Amazon and Ford hold a significant stake in Rivian. Both these companies booked billions of dollars of gains on their Rivian investment in the fourth quarter. However, they might need to book massive losses in the current quarter, looking at Rivian’s price action so far.

Lucid Motors recent developments

Lucid Motors released its fourth-quarter earnings. It delivered 125 cars in 2021 and has delivered around 300 cars this year. It reported revenues of $26.4 million in the fourth quarter. However, it lost around $1 billion in the quarter, which took its 2021 losses to $4.8 billion. The company ended the year with total cash of $6.2 billion.

As part of the business combination with CCIV, Lucid Motors received $4.4 billion as cash which included a massive PIPE (private investment in public equity). CCIV priced the PIPE at $15 which was a 50% premium to the IPO price. However, it was still a big discount to the CCIV’s then stock price. The company also raised another $2 billion from the issuance of green bonds.

Lucid Motors slashed guidance

The key takeaway from Lucid Motors’ fourth-quarter earnings was on the 2022 guidance. It now expects to post between 12,000-14,000 cars in 2022, which is way below the 20,000 that it had guided for. While a lot of automakers have been feeling the pain from the global chip shortage, in LCID’s case, it is more about the shortage of the more routine stuff like glasses.

Rawlinson on the results

It also delayed the launch of its Gravity SUV from 2023 to 2024. Earlier this year, Tesla had also delayed the launch of its Cybertruck from 2022 to 2023. Commenting on the guidance cut, Lucid CEO Peter Rawlinson said “This reflects the extraordinary supply chain and logistics challenges we’ve encountered and our unrelenting focus on delivering the highest-quality products.” He added, “We remain confident in our ability to capture the tremendous opportunities ahead given our technology leadership and strong demand for our cars.”

Rawlinson also confirmed that Lucid Motors would build its first international assembly plant in Saudi Arabia. The plant would have a capacity of 150,000 cars and would be operational in 2025. The move wasn’t really a surprise and it was widely expected. Saudi Arabia’s sovereign wealth fund holds a sizeable stake in LCID and also participated in its PIPE.

Lucid Motors stock forecast

Wall Street analysts are not too bullish on LCID stock and it has two buys and three hold ratings. Its median target price of $58.6 is a premium of over 100% over yesterday’s closing prices.

Last year, Bank of America had issued a bullish note on Lucid Motors’ stock calling it the Ferrari of EV companies. It added, “Our Buy rating on Lucid Group is predicated on our view that the company is one of the most legitimate among the universe of start-up electric vehicle (EV) automakers and also a relative competitive threat to the universe of incumbent automakers.”

It added, “A better measure of LCID’s success than near-term financials while the company/industry is still in very early stages will be customer reservation trends (latest estimate of >10k as of June and Dream Edition fully reserved) and progress on start and ramp of production (target for SOP as of June had been 2H:21). Positive developments on both fronts will be necessary for the stock to work, which we generally anticipate.”

LCID stock target price

However, Morgan Stanley analyst Adam Jonas, who is bullish on Tesla and Rivian, is quite bearish on Lucid Motors. He said, “Scaling production is historically the riskiest part of a company’s lifecycle. This risk is compounded by unprecedented supply chain disruption outside of LCID’s control.”

His fears are coming out to be true as LCID has also faltered on deliveries, at least in the short term. Lordstown Motors, which also released its fourth-quarter earnings, also slashed its 2023 delivery forecast to mere 2,500 cars, which is not even 10% of its original guidance.

Lucid Motors stock long term forecast

The long-term forecast for Lucid Motors stock looks positive looking at the global pivot towards electric cars. The company has positioned itself as a “post luxury” automaker and forecasts that the global luxury car market would rise at a CAGR of 5% between 2018 and 2026 and reach $733 billion. By 2030, the company expects to produce over 500,000 cars and capture 4% market of the estimated 15 million expected global unit sales that year.

However, given the current production issues, it remains to be seen if the company can deliver on its long-term guidance.

Should you buy LCID stock?

Lucid Motors has managed to build a strong brand and looks like a legitimate contender for the “next Tesla.” While a lot of EV companies and models were christened as “next Tesla” and “Tesla killers” none of them lived up to the hype.

So far, LCID has offered a good product proposition even as it has been facing production issues.

Notably, scaling up production was challenging for even Tesla, and Musk described the ramp-up of Model 3 as a production hell. He also said that he was contemplating selling the company to Apple. Meanwhile, Tesla’s production ramp-up has surprised even those who are bearish on the company.

Lucid Motors might also need to deliver on its long-term guidance for the stock to rise higher. It’s the proverbial moment of truth for LCID and other start-up EV companies as they enter the most difficult phase of scaling operations.

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