LCID (NASDAQ:LCID) stock is having a rough year thus far with the stock down nearly 25% YTD. The electric vehicle company has failed to meet investor expectations and their long term growth prospects remain questionable.
Lucid has had itself an abysmal operational year in 2023, failing to meet its vehicle delivery targets. Additionally, the company continues to lose money hand over fist after reporting loss from operations of $2.83 billion in FY23. Bears have every reason to be pessimistic, and the company is likely to continue disappointing shareholders for the foreseeable future.
Shares Are Cheap, and Will Get Even Cheaper
The 2023 fiscal year was a tough year for Lucid Motors. Supply chain constraints and higher interest rates played a significant role in tempered demand.
This holds true for EV giants like Tesla (NASDAQ:TSLA) and BYD (NYSE:BYD), but is even more pronounced for smaller EV players like Lucid. Many investors continue to evaluate the company after the stock cratered nearly 70% since its initial IPO in 2020.
The idea that LCID stock is cheap relative to where it previously traded at may seem like a logical conclusion. However, that couldn’t be further from the truth and the stock is likely to get even cheaper.
There is not enough evidence to suggest that Lucid’s fundamentals will improve, and management’s poor execution is a strong reason why. The company is seeing a deceleration in revenue and increase in operating losses on a YOY basis. Additionally, slower demand for EVs will have a material impact on revenue growth and production in 2024.
Dilution is Inevitable
The global EV market is unforgiving, and even some of the largest car manufacturers in the world struggle to make a profit on them. When EV startups are a part of this equation, the odds of success are often slim to none.
LCID stock initially received major investment dollars from Saudi Arabia’s Public Investment Fund (PIF). Later, they would receive additional funding of $1.8 billion from the PIF in May 2023. Ultimately, this was a blessing and a curse for the company similar to SoftBank’s backing of failed startup, WeWork.
Having a high profile investor like the PIF leaves much room for error, preventing the company from being nimble and managing cash appropriately. Lucid has a cash runway of roughly 12-18 months, and after that they will likely have to raise additional outside funding and dilute shareholders. This is not a good look, especially when you consider the company’s history of poor execution.
LCID Stock: It Was Over Before It Began
Lucid Motors poor delivery growth and colossal losses have made it extremely hard for them to establish ground in the global EV race. Furthermore, management’s excessive cash burn has been their kryptonite.
The company is currently working on cutting costs, but that will be extremely difficult if they plan to ramp up production in 2024. However, even if they are able to meet their production goals they will still be losing a ton of money.
Over the long term, Lucid will be crushed by the competition in the global EV market. Investors should not get their hopes up in 2024, as the growth story was over before it began.
On the date of publication, Terel Miles 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.
