Lucid’s Electric Dreams: Can It Rise Again After a Stock Slump?

Lucid (NASDAQ: LCID) first went public three years ago by merging with a special purpose acquisition company (SPAC). Many optimistic investors hoped it could rival Tesla (NASDAQ: TSLA). Under the leadership of former Tesla chief vehicle engineer Peter Rawlinson, Lucid promised impressive range with its Air sedans, even surpassing that of Tesla’s Model S.

Initially, Lucid’s stock peaked at $55.52 on November 16, 2021, giving it a market cap of $91.4 billion. This valuation was 150 times its expected revenue for 2022. In stark contrast, Lucid’s current stock price is around $2.50, with a market cap of just $6.5 billion, translating to less than four times its projected revenue for 2025.

Image source: Lucid.

Lucid’s standing is minor compared to Tesla, which boasts a market cap of $864 billion and a valuation of seven times its expected sales for next year. This raises the question: could Lucid bounce back and possibly surpass Tesla’s market cap by 2040?

Why Did Lucid’s Stock Plummet?

Similar to many SPAC-backed electric vehicle startups, Lucid made bold claims that led to disappointment. The company projected delivering 20,000 vehicles in 2022 and 49,000 in 2023. However, it delivered only 4,369 vehicles in 2022 and 6,001 in 2023, with an expectation of producing 9,000 vehicles this year.

Challenges included supply chain issues, recalls, and the postponement of its Gravity SUV launch from 2023 to late 2024. Lucid also ceased sharing its reservation numbers, and frequent price reductions suggested a struggle to compete with Tesla’s aggressive pricing. This indicated a lack of brand recognition and pricing power needed to sell premium EVs successfully.

In 2023, Lucid’s revenue fell by 2% to $595 million, while its net loss increased from $2.56 billion to $2.83 billion. Analysts project a 34% revenue increase to $799 million for 2024, but also expect the net loss to grow to $2.89 billion.

In contrast, Tesla’s revenue surged from $413 million in 2022 to $2.01 billion in 2023, narrowing its net loss from $396 million to $74 million.

Despite the dire outlook, Lucid has raised cash through multiple stock and debt offerings. The Saudi Arabian government, holding over 60% of Lucid shares via its Public Investment Fund (PIF), continues to back its long-term growth. This support has left Lucid with $4.28 billion in total liquidity going into its latest quarter.

Lucid aims to expand the annual production capacity at its AMP-1 plant in Arizona from 34,000 to 400,000 vehicles over the next four years. There’s also potential to increase AMP-2’s capacity in Saudi Arabia—from 5,000 to 155,000 vehicles—thanks to contributions from state-backed investors.

What Could Lucid Be Worth in 2040?

If Lucid can ramp up production effectively, analysts estimate its revenue could exceed four times the projected $799 million in 2024, reaching $3.31 billion in 2026. They also foresee a narrowing of net loss from $2.89 billion to $1.89 billion, similar to Tesla’s early stages in 2014 when it reported $3.2 billion in revenue and a net loss of $294 million.

However, replicating Tesla’s growth from 2014 to 2023 presents challenges. Tesla benefited from an early advantage in the EV space, a less crowded market, and significant government subsidies that have since decreased.

If Lucid achieves a 20% compound annual growth rate (CAGR) from 2026 to 2040, it could generate around $43 billion in revenue by 2040. With a valuation of seven times sales, that would equate to a $300 billion market cap—still under half of Tesla’s current worth.

In contrast, analysts predict Tesla’s revenue will grow at a 12% CAGR from 2023 to 2026, with the potential for a modest 10% CAGR following, leading to an estimated $520 billion in revenue by 2040. Trading at seven times sales, this would yield a staggering market cap of $3.6 trillion.

Thus, it appears unlikely that Lucid will attain Tesla’s market cap by 2040. However, if this underdog can find its footing, it might still secure a viable place in the luxury EV market with its high-end, long-range cars.

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Leo Sun has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.