Despite being priced at under $3 per share, Lucid Group (NASDAQ:LCID) stock is one that many investors continue to consider to be overvalued.
Some analysts have put forward optimistic target prices projecting significant returns. However, numerous factors suggest Lucid’s downward trajectory is likely to continue.
Increased competition in the luxury EV market as well as pricing and production-related concerns have continued to hamper LCID stocks.
Despite attempts to boost sales with price cuts, only 6,001 vehicles were delivered in 2023, further declining to 2,391 cars in December. Lucid’s stock price fell by 23% amid intense competition, making it a risky investment choice despite potential high returns.
With 2024 mirroring 2023’s challenges, Lucid’s production outlook remains stagnant, hinting at continued struggles.
Yes, the Federal Reserve may cut rates, and the global economy could improve from here. But for cautious investors, there are simply too many other higher quality EV companies to invest in right now.
Here’s more on why I think Lucid remains a sell, even on news of a $1 billion investment from an affiliate of the Saudi Public Investment Fund.
$1 Billion Investment for Gravity
Lucid secured a $1 billion investment from Saudi Public Investment Fund affiliate Ayar Third Investment Co. This move is aimed at bolstering the company’s cash position prior to Lucid’s launch of their debut electric SUV, the Gravity.
CEO Peter Rawlinson expressed gratitude for PIF’s continuous support, aiming to affirm Lucid’s position as a top EV tech company. Lucid will use the capital, in the form of convertible preferred stock, to speed up its expansion plans and reduce costs.
Saudi Arabia’s PIF now holds almost three-fourth of LCID stock, having invested $5.4 billion in the upstart EV maker.
This fund has acquired shares since 2018, signaling strong trust in the brand. In 2023, Lucid disappointed many investors as its vehicle production came in below its average, producing only 8,248 units for the year.
The company’s recent Q4 earnings report didn’t help matters at all. Now, the company ended 2023 with only $4.3 billion in cash, despite its gigantic net loss. Lucid needs a boost in demand and major orders for their SUV to avoid more shareholder selling pressure.
Wall Street is Bearish
Morgan Stanley reiterated an “underweight” rating for Lucid Group with a $3.00 price target, suggesting a 2.74% upside.
Other analysts, including Stifel Nicolaus, Cantor Fitzgerald, Bank of America, and Robert W. Baird, have adjusted their price targets. Overall, the stock holds an average “hold ” rating with a consensus target price of $4.80.
Wall Street’s downgrades carry weight despite investor sentiment. Analysts like Stephen Gengaro, echoing long-standing concerns, have recently lowered price targets for LCID stock.
Amid uncertainties in the EV sector, Lucid’s fundamentals and delivery activity determine its bearish narrative.
Now’s Not the Time to Buy LCID Stock
Lucid Motors struggled to meet demand, producing only 9,000 electric vehicles in 2024, a modest increase from 2023. This stark contrast from earlier projections underscores Lucid’s challenges in finding buyers and turning a profit. Despite slashing prices, the company reported a $2.8 billion loss in 2023.
The automobile manufacturing sector demands substantial capital investment. Lucid Motors, lagging behind most major EV makers in terms of deliveries, faces the challenge of scaling up production for profitability.
With intense competition from established and emerging EV makers like NIO, Ford, and General Motors, Lucid must navigate multiple capital-raising rounds.
Shareholder dilution from equity and balance sheet strain from debt may affect its performance. Investors should brace for volatility in Lucid stock in 2024 and beyond.
On the date of publication, Chris MacDonald 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.
