Lucid Motors Stock Price Forecast December 2021 – Time to Buy LCID Stock?

Lucid Motors (LCID) stock was trading 6% lower in US premarket price action today. The stock has come off its 2021 highs even as it is up sharply from the SPAC IPO price of $10.

Lucid Motors was the most hyped SPAC merger of 2021. Now, the baton lies with Digital World Acquisition that is merging with former President Donald Trump’s media company. Lucid Motors had merged with Churchill Capital IV and the SPAC went as high as $65 before the merger. Apart from DWAC, it is tough to think of a SPAC that has managed to reach that high before the merger. With Lucid Motors stock down sharply from the peak and looking set to extend the decline today also, should you buy the dip in the startup EV (electric vehicle) company?

Lucid Motors latest news: Why’s LCID stock down today?

Yesterday, Lucid Motors announced the issuance of convertible debt worth $1.75 billion which would mature in 2026. The company has an option to raise another $262.5 million from the issuance. These would be senior unsecured notes that will accrue interest semi-annually in arrears. The notes would be redeemable after 30 December 2024 in a combination of cash or stock at the company’s discretion. Notably, Lucid Motors is yet to decide on the interest rate and conversion ratio.

The news came as a surprise to the markets as Lucid is not exactly in the need to cash and at the end of the third quarter, it had $4.8 billion in cash. If anything, Lucid Motors’ CFO Sherry House expressed optimism over the “strong balance sheet.” Notably, as part of the business combination, 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 CCIV’s stock price.

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LCID stock forecast

LCID has started delivering its Air sedan. Eventually, it plans to launch more models including an affordable electric car. Like Tesla, Lucid Motors is also looking to become a green energy giant and is also betting on energy products. However, it has chosen to partner with Electrify America for the charging network, unlike Tesla which has a massive Supercharging network.

Of the 3 analysts covering Lucid Motors stock, two have a buy rating while one has a sell rating. Its average target price of $44.33 is similar to yesterday’s closing prices. Notably, some analysts have been skeptical of LCID’s valuation as its market cap is above that of Ford, the largest US-based automaker.

Last month, Morgan Stanley analyst Adam Jonas reiterated his underperform rating on the stock. “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,” he said in his note.

Notably, scaling up production was challenging for even Tesla, and its CEO Elon 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. The pace at which its China Gigafactory has ramped up production has been a stellar example of a startup EV company moving up the learning curve.

Some of the other startup EV companies like Lordstown Motors and Nikola have faltered on execution. The former has delayed the launch of its first model by a year and has signed up Foxconn as a production partner now.

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.

It expects to deliver 20,000 cars in 2022 which it expects to rise gradually and reach 135,00 cars by 2025. It expects to become EBITDA positive by 2024 and is forecasting an adjusted EBITDA of $592 million that year.

Tesla is the largest EV company

Meanwhile, Tesla delivered almost half a million cars in 2020 and its annual run rate is now nearing 1 million cars. That’s a big milestone for the Elon Musk-run company as it delivered its millionth car last year only.

Notably, many observers see Lucid Motors and Rivian as worthy competitors to Tesla. Rivian has a market cap of $100 billion even as the company has only recently started to deliver the cars. However, the Amazon-backed company has a massive order backlog including that from Amazon.

Should you buy LCID stock?

Lucid Motors stock looks like an exciting investment opportunity. It 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.

Lucid Motors now has a market cap of $73 billion while Tesla commands a market cap of $1 trillion. However, on an absolute basis, many might find Lucid Motors’ valuation as high. However, one has to take a long-term view and look at the valuations on a relative basis. When compared with EV companies like Tesla and Rivian, LCID does not look much overpriced at these prices. The company has backing from Amazon and Saudi Arabia’s sovereign wealth fund which is another positive.

The fall in Lucid Motors stock looks like a good buying opportunity. The stock also trades above the 50-day and 200-day SMA. If you want to speculate on the next Tesla, Lucid and Rivian are two stocks that should be on your radar.

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