Lucid Stock Outlook: The Good, the Bad and the Verdict
Plenty have thrown in the towel with positions in Lucid Group (NASDAQ:LCID), but many analysts and investors remain optimistic about the future prospects of LCID stock.
While others have headed for the exits, they’ve held on, continuing to argue the consistently-questionable bull case for the struggling electric vehicle maker’s shares. In fact, just recently, the bulls have come up with a grab-bag of creative arguments to back their bullish view.
However, much like the other factors cited as making Lucid a great opportunity, a closer look suggests that these newly-discussed ones aren’t likely going to turn things around, either.
As I’ve put it many times before, the issues that have knocked this once-hot EV play to the stock market junkyard are likely to persist. With this, it remains very difficult for me to shake off my long standing skepticism about this stock.
LCID Stock and the Latest Bull Cases on the Block
In prior coverage of Lucid Group, I have discussed how the company has continued to experience both production and demand headwinds. This led to very underwhelming production and delivery numbers for the EV startup.
These issues are not stopping new bull cases for LCID stock from emerging. First, there has been some talk about the unfolding labor troubles with the legacy Detroit automakers possibly creating an opportunity for non-union EV pure plays like Lucid.
Second, there may be big monetization potential with Lucid’s EV technology. At least, that’s the view of RBC’s Tom Narayan. Last week, the analyst conceded that Lucid’s poor performance as an EV manufacturer hardly justifies its current valuation, but the fledgling startup has some of the best EV technology out there.
In Narayan’s view, if the company were to license this technology to other automakers, the resultant revenue could help justify a $15 per share valuation for the stock. On the surface, not too shabby, given that is more than double LCID’s current trading price of less than $6 per share. Still, while both theses represent great out-of-the-box thinking, they are not without their flaws.
Why Both Arguments Fall Flat
Based on the latest two bull to emerge for LCID stock, now’s the time to buy, right? Not so fast! Upon closer inspection, both of these arguments fall flat, to put it bluntly. The labor-related argument is actually quite easy to dismantle.
Although a possible UAW strike may delay the Detroit Three’s rollout of their EV offerings, at best this may be just a benefit for mass market EV pure plays like Tesla (NASDAQ:TSLA). It’s hard seeing this boosting sales for Lucid’s luxury EV offerings.
As for the technology-based bull case, I’ll admit there’s more than just one analyst’s optimism on its side. Lucid did enter a technology-licensing deal with British automaker Aston Martin back in June. There may be potential for the company to enter similar deals with other small, specialty automakers around the world.
However, I wouldn’t say the same about the chances of a large-scale automaker licensing the technology. Narayan’s thesis hinges upon the big names along with the smaller names making deals. After all, if Lucid’s technology could boost their EV profitability by 50%-70%, why hasn’t a legacy automaker (or Lucid’s majority shareholder, Saudi Arabia’s Public Investment Fund) made a bid for the company?
The Verdict on LCID Stock
It’s not only analysts and investors looking at Lucid with rose-colored glasses. The company itself may be as well, based upon recent statements made by chief engineer (Eric Bach) at the IAA auto show in Munich, Germany. Bach hinted that Lucid still plans to enter the Chinese EV market.
Although the exec did not make any definitive statements, entering new markets should be the last thing on this EV maker’s mind, when its challenges stateside have yet to ease.
Granted, anything’s possible. A UAW strike could give EV pure plays, Lucid included, the upper hand. Narayan could be on the money, and a big ticket licensing deal may be forthcoming.
Still, to err on the side of caution, it’s best to consider the latest bullish arguments for LCID stock to be little more than grasping for straws.
LCID stock earns a D rating in Portfolio Grader.
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.