Lucid Stock Makes Tesla Look Cheap
Shares of Lucid Group (NASDAQ:LCID) sold off today, falling more than 10% as investors took profits. Yet, LCID stock still has a ludicrous market cap of more than $76 billion.
That puts the electric vehicle startup on par with some of the biggest U.S. automakers. Ford Motor (NYSE:F) and General Motors (NYSE:GM), for example, have market caps of roughly $78 billion and $90.5 billion, respectively.
These established companies generate well over $100 billion in revenue a year. Lucid, on the other hand, just reported third-quarter revenue of $232,000. That revenue wasn’t from its EV sales, though, as the company didn’t start deliveries until late October. Rather, it came from a deal with Formula E racing series for the use of Lucid’s battery-pack technology.
While analysts are predicting the company will post revenue just north of $76 million for the full year, that pales in comparison to Ford and General Motors’ sales.
Lucid’s Valuation is Just Silly
The recent run-up in LCID stock was due in part to news the company now has more than 17,000 reservations for its Lucid Air and management saying it is on track to produce 20,000 vehicles in 2022.
Even assuming all 20,000 cars are produced, and the unreserved 3,000 cars sold at full price ($77,400), that means Lucid would generate $1.55 billion next year. LCID stock is currently selling for nearly 50 times that amount.
Tesla (NASDAQ:TSLA), which analysts think will earn $70 billion in revenue next year, has a market cap of $1.1 trillion, or about 16 times revenue. Lucid actually makes Tesla look like a cheap stock.
Lucid isn’t the only electric vehicle stock in a bubble.
Rivian (NASDAQ:RIVN), which went public a week and a half ago, has a market cap higher than both Ford and GM. The company has an electric truck in production and plans to start making an electric SUV next month. It is also working on an electric delivery van, which Amazon (NASDAQ:AMZN) has ordered 100,000 of to be delivered by 2030.
The company says its Illinois plant is capable of making 150,000 vehicles a year and it has plans to expand its production facilities. However, Rivian has yet to report any revenue. Yet, it has a market cap of nearly $110 billion.
Investors looking to take advantage of the electric vehicle trend with less risk need look no further than Ford and GM. Both companies are investing big in the electric vehicle space.
While Ford doesn’t expect to begin producing EVs till 2025, it does own about 12% of Rivian, a stake worth over $13 billion. GM plans to release at least 30 EVs by 2025.
In terms of value, GM is selling for less than two-thirds next year’s projected sales, while Ford is selling for about half.
What’s more, there’s something investors chasing EV stocks higher are missing.
What EV Investors Are Overlooking
Electric car deliveries have been delayed because electrics have a lot of electronics. But they don’t have to.
Electric cars are simple machines — just a spinning drivetrain inside an electric motor. Most moving parts can be hidden in a wheel well, as we’ve seen with REE Automotive’s (NASDAQ:REE) design. With fewer moving parts, electric cars don’t break down the way gas-powered cars do, reducing the need to replace them.
On top of that, there’s a second revolution coming: autonomous driving.
GM is already selling hands-free driving to the tune of a 40-year-old rock anthem. Once they’re autonomous, electric cars can be sold as a service. Why buy something that sits in your driveway 23 hours a day when you can rent as much (or as little) transport service as you need?
The Bottom Line on LCID Stock
Electric cars aren’t like gas-powered cars. You won’t need a new one every other year. You may not need to buy one at all.
Personal electric transport can be scaled to need and ordered online. It may feel sexy to have a Lucid Air now, but it could be an unnecessary luxury within a decade.
Companies like Lucid, Rivian and even Tesla are selling as though 2030 transportation will be just like 2021 transportation, only hands-free and electric. It won’t be. It will be very different.
Once we all have electric cars, we won’t need to obsess over them as we do our current cars, which need regular maintenance. Don’t assume the future will replicate the past and get caught in the electric vehicle bubble.
On the date of publication, Dana Blankenhorn held a long position in AMZN. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Dana Blankenhorn has been a financial journalist since 1978. His latest book is Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law, essays on technology available at the Amazon Kindle store. Follow him on Twitter at @danablankenhorn.
