Sometimes, it’s fine to take risks with small amounts of investable capital. Yet, I don’t recommend betting your hard-earned money on electric vehicle (EV) manufacturer Lucid Group (NASDAQ:LCID). Despite Lucid Group’s best efforts to compete with Tesla (NASDAQ:TSLA) and other EV-industry rivals, LCID stock is destined to lose value in the long run.
As we’ll discover in a moment, Lucid Group is actually following in Tesla’s footsteps with a strategy that’s intended to boost vehicle sales. However, it looks like the market isn’t convinced that Lucid Group will succeed with this tactic. Besides, Lucid’s latest round of financial stats were disappointing despite Wall Street’s low expectations.
LCID Stock Falls Despite Price-Cutting Strategy
Not long ago, Lucid Group reportedly reduced the prices of some of its EV models. Does this sound familiar? It should, as Lucid Group definitely didn’t pioneer this strategy.
Earlier this year, in response to inflationary pressures, Tesla implemented no fewer than half a dozen vehicle price cuts. Therefore, Lucid Group’s recently implemented price reductions don’t represent a novel strategy.
LCID stock briefly popped after the report of Lucid’s vehicle price reductions but then coughed up those gains in the following days. It just goes to show that the market wants to see results, not just follow-the-leader tactics.
Furthermore, even after the price cuts, Lucid Group’s vehicles remain prohibitively expensive for the average car buyer nowadays. Not everyone can afford to pay $126,000 (after the price reductions) for Lucid’s Grand Touring model, or $95,000 for the standard Touring version, or $82,400 for the Air Pure model.
Lucid Group’s Results Don’t Measure Up
Previously, I mentioned that the market prioritizes results. On that topic, Lucid Group recently released its second-quarter 2023 financial results. Unfortunately, Lucid’s fiscal figures didn’t measure up to Wall Street’s expectations.
And I must say, analysts weren’t exactly asking for the sun and the stars. They knew that Lucid Group wouldn’t be profitable, so analysts predicted that the company would report $182 million in Q2 2023 sales and an earnings loss of 34 cents per share.
As it turned out, Lucid Group missed on both counts with roughly $151 million in sales and an earnings loss of 40 cents per share. This represents Lucid’s second consecutive quarter of earnings per share (EPS) misses.
In addition, Lucid Group proudly announced that the automaker is “on track to manufacture more than 10,000 vehicles in 2023.” Now, this might sound impressive, but let’s put it into perspective.
Earlier this year, Wall Street had anticipated that Lucid’s full-year vehicle output would be closer to 20,000. Thus, I wouldn’t claim that Lucid Group’s current 2023 production goal is particularly ambitious.
LCID Stock: Don’t Even Take a Small Position
Even after price cuts, Lucid Group’s luxury vehicles are too expensive for many car buyers nowadays. Also, Lucid’s financial figures didn’t live up to Wall Street’s modest expectations.
At this point, I wouldn’t recommend investing in Lucid Group even if LCID stock declined substantially. Instead of taking a share position now — even a small one — it’s wise to just stay out of the trade altogether.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
