It’s Time to Drop Lucid Stock Like a Hot Potato

Stocks to sell

Lucid Motors (NASDAQ:LCID) is an intriguing EV company many investors have on their radar. Indeed, the company’s high-priced luxury EVs have some of the best specs in the sector. That said, volatility with LCID stock has led to surges and declines (mostly declines over the past two years), forcing certain long-term investors out of the stock.

Several factors have driven these declines. Namely, Lucid has disappointed investors with poor quarterly results, which drove a new all-time low for LCID stock this year. Despite launching the Gravity model, concerns about cash burn, delivery issues, and overall production progress have hampered the stock. With its premium pricing model, Lucid also faces challenges meeting production demands and has consistently let down the market, reporting only 1,457 deliveries and 1,550 vehicles produced in Q3.

Despite lower-than-expected losses, management revised yearly guidance. Another significant concern is the company’s heavy reliance on Saudi Arabian investment. Regular equity market reliance to cover losses raises questions about Lucid’s sustainability. Burning more cash than generating with each car, the future looks uncertain without sustained investment.

Goodbye Nasdaq 100 Index

As part of the Nasdaq 100’s annual changes, starting December 18, Lucid and six other companies were removed from the index. Lucid joined in December 2021 but faced delivery challenges that impacted its position.

Production dipped over 50% from its peak at 3,493 in Q4 2022, with Lucid manufacturing only 1,550 vehicles in Q3. The company revised its annual production target to 8,000-8,500, down 50%. Coupled with lower deliveries, Lucid reported a net loss of $2.17 billion in the first nine months, with a Q3 loss of approximately $433,000 per EV.

Despite challenges, the startup claims improvement, citing progress in its cost control program and identifying additional opportunities for 2024. Lucid recently unveiled its electric SUV, the Gravity, with a 440-mile range and plans for a late 2024 release. The company has also reduced its Air electric sedan prices to stimulate demand.

Bullish investors will have to see how these catalysts affect LCID stock. However, removing Lucid from this major exchange isn’t a great thing for investors, as it means underlying buying demand for LCID stock will be much lower moving forward.

When a CFO Leaves, Investors Take Note

In more bad news, LCID shares dropped around 9% following the immediate departure of CFO Sherry House, who cited pursuing other opportunities. Gagan Dhingra, the VP of Accounting, steps in as interim CFO until a permanent replacement is found.

CFO Sherry House leaves Lucid immediately for new opportunities. Lucid’s stock dropped around 9%. VP Gagan Dhingra serves as interim CFO until a permanent replacement is found. House stays on as an advisor until Dec. 31.

Lucid’s financials this year weren’t strong, likely influencing House’s resignation. Q3 revenue at $138 million, down 30% year-over-year, missed the $178 million estimate. GAAP profitability remains distant. Delivery guidance was also lowered from 10,000-14,000 to 8,000-8,500 vehicles.

Sell LCID Stock Now

Recent events may have influenced Ms. House’s resignation, but the company’s challenging year is evident. A broader EV demand slowdown contributes to the decline, leading the carmaker to counter market challenges with generous cashback offers on new vehicle purchases.

Despite efforts to boost production, Lucid lowered its 2023 delivery expectations in the latest quarterly report. Setbacks led to its removal from the Nasdaq 100, raising uncertainty about its future. These factors combine to paint a pretty negative picture for the stock, and it’s one I think is best avoided right now.

On the date of publication, Chris MacDonald 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 Publishing Guidelines.

Chris MacDonald’s love for investing led him to pursue an MBA in Finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative, long-term investing perspective.