Lucid (NASDAQ:LCID) stock isn’t having a good year so far. Those who bet on the rise of a viable Tesla (NASDAQ:TSLA) competitor have had their hopes dashed once again.
The luxury electric vehicle stock has seen its share price plummet 40.6% as of the end of Tuesday’s trading session. Continued macroeconomic uncertainty and anemic demand in the EV market could lead shares to tumble even further. If you’re still holding onto your LCID shares, here are 3 reasons to consider selling them.
Q1 Delivery Figures and LCID Stock
While the global electric vehicle market is experiencing a slowdown, there are important differences to point out. Chinese EV makers have outperformed American counterparts.
A couple weeks ago, Bloomberg reported that a number of Chinese EV companies, including BYD (OTCMKTS:BYDDY) and Li Auto (NASDAQ:LI), ended Q1 on a strong note. Chinese domestic demand for as well as price wars between market participants helped keep growth strong for these key players.
In the United States, both Tesla and Lucid have not enjoyed the same growth. To boost delivery growth, Lucid, like many other EV makers, pursued a strategy of price cuts.
In Lucid’s case, they did boost demand and deliveries came in above estimates at 1,967 vehicles. Unfortunately, this strategy a price cuts is a double-edged sword.
While delivery numbers may receive a boost, Lucid’s margins are likely to suffer. Falling profitability metrics can lead to the company’s need to raise additional capital from equities markets, which would effectively dilute current shareholders.
Q1 Production Numbers
Lucid’s first quarter production numbers highlight the dire state of EV demand, particularly in the United States. These figures indicate manufacturing capabilities and demand for electric vehicles.
Lucid produced 1,728 vehicles in Q1, falling short of the predicted 2,123. Q1 production numbers are 28% lower than the prior quarter. Analysts must closely monitor how these numbers change to assess demand for Lucid’s EVs.
Wall Street Downgrades Spell What Could Come
There are 15 analysts at Wall Street firms who cover LCID stock. Unfortunately, an overwhelming majority of them are not optimistic about the luxury EV maker’s future prospects.
According to Koyfin, only one analyst has rated LCID stock as a “Buy,” while the overwhelming majority of the other analysts have given LCID a lukewarm “Hold’ rating.
RBC, a Canadian bank, reduced their price target from $6/share to $3/share and cited high operating costs as well as insufficient demand in Lucid’s end market as reasons for the price target reduction.
Stifel and Baird also lowered their price targets. Given where LCID stock is sitting now and where its 12-month average price target is, there is 30% return potential.
My idea is, there are other EV stocks to consider with better growth prospects and less volatility.
On the date of publication, Tyrik Torres 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.
