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Key Factors

  • Lucid had one other tepid quarter with rising money burn, sending shares down 15%. 
  • The corporate is capitalized now however will burn by means of it rapidly, elevating the danger of further dilution. 
  • Quick curiosity is excessive and can weigh on the value motion for quarters to come back. 
  • 5 shares we like higher than Lucid Group

Lucid’s NASDAQ: LCID inventory worth has been down-trending since 2021, and it isn’t over. The Q1 outcomes aren’t horrible, however they did nothing to enhance the outlook for development, market domination, or income. The outcomes frightened the market as a result of spending is rising, and profitability is as elusive as ever. As a result of competitors within the EV market is heating up, price is among the many largest components driving shoppers, and Lucid automobiles are costly EVs, it’s unlikely Lucid will change course quickly. 

General MarketRank™
1.98 out of 5

Analyst Ranking
Cut back

Upside/Draw back
56.5% Upside

Quick Curiosity
N/A

Dividend Energy
N/A

Sustainability
N/A

Information Sentiment
-0.19

Insider Buying and selling
N/A

Projected Earnings Development
Reducing

See Full Particulars

Lucid CEO Peter Rawlinson touted plans for a low-cost mannequin to rival opponents like Tesla NASDAQ: TSLA, however that is almost definitely a pipe dream. Rawlinson thinks we might count on such a mannequin, with a goal worth of $40,000, in 2026, which might be very tough given the price of engineering and hurdles to manufacturing. 

Tesla, the present EV market chief, is on the identical observe and has been for years however remains to be unable to supply such a automobile. Tesla makes cash and might maintain its operations unaided whereas leaning into the low-cost route; Lucid doesn’t. Even when Lucid can convey a low-cost mannequin to market by 2026, Tesla is projecting 2025 for its low-cost model, so it would possible retain its management place. 

Lucid Is Clearly Underperforming Expectations, Shares Fall 15%

$2.71

+0.09 (+3.44%)

(As of 05/8/2024 ET)

52-Week Vary
$2.29

$8.37

Value Goal
$4.24

Lucid didn’t have a horrible quarter, however the 15.6% income development is 520 foundation factors shy of the consensus as incentives and worth cuts dig into the highest line. The corporate says it produced 1,728 autos and delivered 1,967, which aided the working efficiency, however elevated spending offset the acquire. Will increase in R&D and SG&A of 25% YOY led to a GAAP lack of 30 cents, a nickel shy of the consensus and expenditure is predicted to stay scorching this yr. Spending is important to ramp up new automobile growth. 

Among the many many considerations are capitalization. The corporate is well-capitalized at this time and acquired $1 billion in further funding throughout the quarter, but it surely comes at a value. The brand new funding and different dilutive efforts have elevated the share rely by 25% since final yr, and extra are coming. The steadiness sheet highlights embody 504,450 shares of redeemable convertible most well-liked inventory that weren’t there final yr. Traders ought to count on additional dilution as a result of the corporate is in a cash-burning trade, has restricted funds, and has billions of unissued shares. 

The share rely and outlook for dilution are two causes the brief sellers have an interest, and the brief curiosity is excessive. The brief rate of interest was working close to 30% on the final report and has possible remained unchanged. As a result of the corporate continues to burn money traders ought to count on the brief curiosity to stay excessive and to extend over time. The corporate is well-capitalized now, however the $700,000 in quarterly burns will eat by means of $5 billion in a matter of quarters; further dilution may very well be on the desk earlier than the top of 2024. 

Analysts Might Put a Backside in Lucid’s Market

Analysts’ sentiment in Lucid soured to Cut back over the previous few quarters and is unchanged now. Nevertheless, the group has hesitated to make revisions instantly after the earnings launch and views the inventory as undervalued till it does. Marketbeat.com tracks 10 analysts with rankings on the inventory, they usually include a consensus goal of $4.35 and a low of $2.90. The $2.90 low goal is above the present worth motion and will lead the market to rebound if left unchanged. 

Lucid shares are in a downtrend and will have reached the underside, however there are dangers for bulls; it may very well be a penny inventory quickly. The 15% post-release drop has the market set as much as retest the latest low, and a brand new low could also be set. The downtrend shall be confirmed in that situation and will lengthen to the low $2 vary or decrease. The MACD and stochastic favor a brand new low, which can come inside days or perhaps weeks. 

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