Despite Recent Setback, Don’t Hit the Brakes on Lucid Stock
Over the past few months, shares in Lucid Group (NASDAQ:LCID) have ebbed and flowed. Briefly moving above $20 per share, only to fall back below $20 per share. In recent days, this has played out yet again. After zooming above $20 per share ahead of earnings results, LCID stock has plunged following its release.
Why? Underwhelming results played a role, but the main culprit was a discouraging update to guidance. Due to supply chain and logistics headwinds, management has had to substantially walk back its 2022 production forecast.
Investors that dived into the stock before its latest temporary uptick find themselves back at square one. Worse yet, it appears now that the “story” with Lucid may take far longer to play out. However, don’t assume it now has a slim chance of ultimately playing out. With this, let’s dive in, and find out why.
LCID Stock and Its Post-Earnings Slide
On Aug. 3, Lucid Group released results for the June quarter, along with updates to guidance. Again, the results were not encouraging. Revenue of $97.3 million fell well short of estimates. Sell-side analysts were expecting quarterly revenue of $145.49 million.
Worse yet, management’s updates to guidance suggest more disappointment ahead for the company’s operating results. The above-mentioned supply chain and logistics issues have resulted in the company cutting its 2022 production target. Before, it was forecasting 2022 production of 12,000-14,000 vehicles. With the update, this target has been lowered to just 6,000-7,000 vehicles.
Put it all together, and it’s easy to see why the market quickly sent LCID stock down by double-digits on the news. 2022 results will come nowhere close to the estimates management presented to investors when it first went public. Hitting tens of billions in sales, and billions in earnings, by the mid-2020s, may look more like a stretch goal at best right now.
Yet while its numbers in the near term are lackluster, that doesn’t mean the growth story here is completely busted. Mainly, because an important factor remains firmly in its corner.
Robust Demand Hasn’t Gone Away
Reading just the headlines, it may appear as if LCID stock skeptics were right all along. That is, this EV upstart is mostly hype, with little substance. Its management made big promises, but so far has been unable to deliver.
However, examine the situation more closely. It’s clear the issues with the company now are mere hiccups. When supply chain and logistics issues ease, it is well positioned to get back up to speed with production. Once this happens, it has robust demand that it can sell into.
There are over 37,000 reservations for its Lucid Air luxury EV sedan. It may be just a year or two away from getting annual revenue up well above the $1 billion mark. With automotive critics noting the Air’s advantages over Tesla’s (NASDAQ:TSLA) comparable Model S offering, Lucid has a good chance of grabbing a large amount of market share from the current dominant force in luxury EVs. High gas prices could also indirectly help boost demand.
This upstart is already on track to get its annual production capacity up to 500,000 units by the mid-2020s. Becoming a formidable competitor in this space remains attainable.
The Verdict on LCID Stock
Lucid stock currently sports a “C” rating in my Portfolio Grader. The company’s latest production forecast could keep it at depressed prices in the short term. However, today’s bottlenecks won’t last forever. There continues to be high demand, interest, and enthusiasm among potential customers of its vehicles. It’s too early to write off this aspiring “Tesla killer.”
If said demand continues to be strong, it may just well get to billions in revenue and earnings during this decade. Just signaling that it’s en route to do so will drive a big rebound for shares.
As you may recall, this stock traded for prices north of $50 per share as recently as early December. It’s not outside the realm of possibility that it reaches such lofty prices once again in the years ahead.
It may take time, but there’s still strong long-term upside potential with LCID stock.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
