Lucid’s Red Flags: Why LCID Stock Is a Risky Bet in 2024

Stocks to sell

Despite the growth of Electric Vehicle (EV) sales in the U.S., the electrification transition has faced challenges. Lucid (NASDAQ:LCID) is among the leading EV players many investors are watching. LCID stock delivered 1,457 vehicles in Q3, falling short of the expected 2,000, possibly influenced by charging infrastructure and affordability issues.

Lucid revised its fiscal 2023 production forecast to 8,000-8,500 vehicles, down from over 10,000, citing weakened demand. Q3 revenue fell 29.5% year-over-year to $137.81 million, below the expected $177 million. Considering these challenges, analyzing Lucid’s fundamentals is prudent before investing.

The Company is Flailing

The EV manufacturer based in Newark, California, faced a 44% share price decline in the last six months due to leadership shifts and profitability worries. Their Q3 earnings showed a 29% revenue drop and a 19% increase in net loss year-over-year. Despite expecting 10,000 vehicle deliveries in 2023, they reported around 8,000 in Q3.

Lucid’s ambitious 2022 plans, including a pledge to produce half a million EVs by the mid-2020s, fell short. Unable to hit 10,000 vehicles this year, the revised target is 8,000 to 8,500 EVs. To cut costs, hundreds of workers were laid off, and Lucid’s losses stand at $9.5 billion. Remaining unprofitable since inception, analysts predict two to four years, at best, for large-scale EV production.

Investors Are Looking At Other Options

Despite a challenging year for Lucid stock, the situation worsened in late 2023. Sherry House resigned as the CFO, leading to a 9% drop in LCID stock. Additionally, Lucid was removed from the Nasdaq 100 index, raising concerns among investors.

Also, aside from the initial positive news about Lucid Group’s EV production facility in Saudi Arabia, boasting about assembling almost 800 cars since its opening in December seems underwhelming, considering significant production numbers are typically measured in the thousands.

There May Be Better EV Plays Out There

Despite potential upside in the broader market, the negative factors surrounding LCID stock, including challenges in the U.S. market and the need for dilutive equity raises, outweigh positive trends. Saudi-backed improvements in production may not sufficiently compensate for U.S. struggles.

In 2023, multiple warnings about Lucid Group came to light, with Blanke Schein Wealth Management’s CIO advising against LCID stock due to industry challenges, CFO resignation, weaker financials, and a high cash-burn rate.

Lucid encounters risks like supply chain disruptions, regulations, competition, and customer satisfaction. Being new to the EV sector, it must execute plans flawlessly. Historical broken promises make LCID stock unattractive, possibly facing closure or foreign acquisition without profitability or shareholder returns.

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.

Articles You May Like

3 Hype-Driven Stocks Destined for a Dramatic Fall
SoundHound AI Stock May Be Poised for a Correction. Be Careful.
The Top 3 Long-Term Stocks to Buy for Decades of Gains
An Upcoming Stock Split Doesn’t Make Broadcom Stock a Buy
Lucid Stock: Do Yourself a Favor – Don’t Wait for a Savior!