Watch Lucid’s Q4 Earnings for EV Production Progress Before Buying

Lucid (NASDAQ:LCID) will likely release its fourth-quarter results next week or shortly thereafter. Investors should expect to see the company show solid progress in the production of its electric vehicles (EVs). As a result, LCID stock could stage another move upward, depending on the guidance the company gives for Q1 and 2022.

The Lucid Air model is currently being built and sold from the company’s Casa Grande, Arizona plant (just south of Phoenix). This is a large, luxury model EV sedan.

Lucid is taking the same path that Tesla (NASDAQ:TSLA) did when it started volume EV production. It is building a large and expensive EV in order to help maximize revenue, reduce scale costs and build a high-end reputation as an EV maker. Tesla started building the Model S as a luxury model sedan, and the Lucid Air competes with this version.

Where Analysts Stand on Lucid

So far, Wall Street is impressed. LCID stock has a market capitalization of almost $43 billion at its price of $25.94 on Feb. 11. This is pretty ambitious for a company that has yet to produce one full year of positive net income.

The company went public on July 26, 2021, when its SPAC (special purpose acquisition company) merger deal closed. Lucid now has over $4.8 billion in cash at the end of Q3. It also raised an additional $1.75 billion in convertible senior notes on Dec. 9.

Most analysts believe this should be enough capital at least through its first year of production. Citigroup analyst Itay Michaeli is one of the few bulls on Wall Street, according to Barron’s. He has a “buy” recommendation and a price target of $57 per share, which is quite aggressive.

For example, Seeking Alpha reports that the average price target of five analysts is $41 per share. However, TipRanks says that the recent average price target in the last three months for five analysts is $36.50, or 41% over today’s price.

However, two analysts who have initiated coverage in the past three months have put the stock on a “neutral” rating/recommendation, according to Yahoo! Finance. (They use the analyst survey data from Refinitiv.)

Competition Issues

The problem may be how well the company may be able to last on its present cash resources. In addition, there are questions as to how strong is the demand for luxury, high-priced EV sedans.

For example, the Lucid Air starts at a price of $78,900 and goes up from there, depending on its configuration. According to Car and Driver magazine, Lucid Air competes against Volkswagen’s (OTCMKTS:VWAGY) Porsche Taycan (another EV) at $84,500, and the Mercedes Benz EQS, starting at $103,360.

It also competes against the Tesla Model S, which starts at $96,440 for the 2022 model. However, Lucid’s model claims to have 520 miles of EPA-estimated all-electric range, compared to just 412 for the Tesla Model S. This seems to be one of its main draws.

The upcoming Q4 results will show whether this feature has brought in commensurate sales. The company’s original slide deck presentation did not have a forecast level of production for 2021 (essentially Q4). However, it projected 20,000 EVs for 2022. Analysts will be looking to see if the company is on track to be able to ramp up to this level.

Where This Leaves LCID Stock

At this point most investors are likely to take a “wait and see” approach to LCID stock. Analysts will have to revise their models. Once they analyze 2021 and also any comments Lucid makes about existing production and sales in Q1, they will assess its valuation.

It could be that they will consider the stock fully valued at the present time, without blowout Q4 numbers. Therefore, most patient investors will wait for an opportunity to buy in at a cheaper price.

On the date of publication, Mark Hake did not hold (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.

Mark Hake writes about personal finance at mrhake.medium.com and Newsbreak.com and runs the Total Yield Value Guide which you can review here.