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Key Factors

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

Lucid’s NASDAQ: LCID inventory value has been down-trending since 2021, and it’s not over. The Q1 outcomes aren’t horrible, however they did nothing to enhance the outlook for development, market domination, or earnings. 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, value is among the many largest components driving shoppers, and Lucid automobiles are costly EVs, it’s unlikely Lucid will change route quickly. 

General MarketRank™
1.98 out of 5

Analyst Score
Scale back

Upside/Draw back
56.5% Upside

Quick Curiosity
N/A

Dividend Power
N/A

Sustainability
N/A

Information Sentiment
-0.19

Insider Buying and selling
N/A

Projected Earnings Progress
Lowering

See Full Particulars

Lucid CEO Peter Rawlinson touted plans for a low-cost mannequin to rival opponents like Tesla NASDAQ: TSLA, however that is more than likely a pipe dream. Rawlinson thinks we might anticipate such a mannequin, with a goal value 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 continues to be unable to provide such a car. Tesla makes cash and might maintain its operations unaided whereas leaning into the low-cost route; Lucid doesn’t. Even when Lucid can carry a low-cost mannequin to market by 2026, Tesla is projecting 2025 for its low-cost model, so it would seemingly 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

Worth 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 value 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 achieve. 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 sizzling this yr. Spending is critical to ramp up new car improvement. 

Among the many many issues are capitalization. The corporate is well-capitalized at the moment and obtained $1 billion in further funding throughout the quarter, however it comes at a price. The brand new funding and different dilutive efforts have elevated the share depend by 25% since final yr, and extra are coming. The stability sheet highlights embody 504,450 shares of redeemable convertible most well-liked inventory that weren’t there final yr. Buyers ought to anticipate additional dilution as a result of the corporate is in a cash-burning business, has restricted funds, and has billions of unissued shares. 

The share depend and outlook for dilution are two causes the quick sellers have an interest, and the quick curiosity is excessive. The quick rate of interest was operating close to 30% on the final report and has seemingly remained unchanged. As a result of the corporate continues to burn money buyers ought to anticipate the quick 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 way of $5 billion in a matter of quarters; further dilution could possibly 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 Scale back over the previous few quarters and is unchanged now. Nonetheless, 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 value 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 could possibly be a penny inventory quickly. The 15% post-release drop has the market set as much as retest the current low, and a brand new low could also be set. The downtrend might be confirmed in that state of affairs 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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Whereas Lucid Group at present has a “Scale back” score amongst analysts, top-rated analysts consider these 5 shares are higher buys.

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