Sell LCID Stock? Laying Out the Bear Case for Lucid Group.
Sorry to say it, but it’s time for the perma-bulls to give up on electric vehicle (EV) manufacturer Lucid Group (NASDAQ:LCID). The company’s subpar financials and disappointing delivery data certainly don’t bode well for LCID stock. Besides, it’s problematic that Lucid Group is selling ultra-expensive vehicles while Tesla (NASDAQ:TSLA) is using the smarter strategy of implementing price cuts.
Lucid Group is a promising EV startup, but the company can’t grow if it’s not taking proactive steps to sell more vehicles. Chief Financial Officer Sherry House recently declared that Lucid’s “mission and optimism are unchanged.” That’s fine, but it won’t be enough to keep the company afloat, financially speaking.
Instead of asserting their optimism, Lucid Group’s management should consider a different strategy. Lucid has to improve its EV delivery figures in the coming quarters. Otherwise, the automaker and its stakeholders could face unsustainable financial losses.
LCID Stock’s Decline Is Relentless
Perhaps the strongest bearish argument against investing in Lucid Group is the unrelenting decline in LCID stock. It could actually become a penny stock this year, if we informally define “penny stock” as one that trades below $5 per share.
Lucid Group’s loyal investors need a positive catalyst before a bad situation becomes even worse. Yet, the evidence doesn’t look good for Lucid Group. For example, the company had previously guided for 2023 production in the range of 10,000 to 14,000 vehicles. More recently, however, Lucid modified this to a less ambitious-sounding goal of producing “more than 10,000 vehicles.”
It’s also bothersome that Lucid Group’s first-quarter 2023 revenue of $149.4 million missed Wall Street’s estimate of $197.8 million. Additionally, Lucid reported an adjusted EPS loss of 43 cents, a disappointing result compared to the 40-cent loss that analysts had expected.
Don’t Expect Lucid Group’s SUV to Save the Company
In terms of vehicle deliveries, Lucid Group’s first-quarter performance certainly wasn’t impressive. Specifically, Lucid “produced 2,314 vehicles at its manufacturing facility in Arizona” in Q1, but only “delivered 1,406 vehicles during the same period.”
That’s a delivery-to-production ratio of around 61%, so Lucid Group needs to improve in that area. Lucid Group CEO Peter Rawlinson might claim that the “Lucid Air redefined the luxury sedan category,” but the delivery data doesn’t seem to support his bragging.
Rawlinson assures that Lucid’s upcoming Gravity electric SUV will “do the same [i.e., redefine] in the SUV category.” Yet, if the Lucid Air wasn’t a blockbuster seller, investors shouldn’t expect any miracles to occur with the Gravity SUV.
Lucid Group’s press release states that the Gravity SUV is “now testing on public roads throughout the U.S.” It emphasizes luxury but ignores the topic of affordability. Reportedly, the Lucid Air starts at a whopping $87,400. As of this writing, I don’t have a reliable source for the Gravity SUV’s starting price. However, it’s reasonable to expect that it will be unaffordable for many middle-class EV shoppers.
The Bear Case for LCID Stock Is Strong in 2023
Tesla is making a smart move by reducing the prices of some of its EVs. In contrast, Lucid Group is evidently focusing on luxury while ignoring the affordability factor. This could prove to be a costly mistake for Lucid Group.
Moreover, Lucid Group’s first-quarter EV delivery, revenue and EPS figures are highly discouraging. All in all, LCID stock investors shouldn’t expect the upcoming launch of the Gravity SUV to rescue them. Thus, it’s reasonable to cut your losses now or to choose not to invest in Lucid Group in the first place.
On the date of publication, David Moadel 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.
