Assessing Electric Vehicle Stocks: Tesla vs. Lucid
Current market dynamics suggest uncertainty for the electric vehicle (EV) sector, with potential changes to federal EV tax credits and consumers leaning towards hybrids over fully electric cars.
As the shift towards an EV-dominated market progresses slower than anticipated, investors might overlook opportunities in this field. Is it wiser to allocate funds towards the established leader Tesla (NASDAQ: TSLA) or the emerging EV company Lucid (NASDAQ: LCID)?
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Challenges Ahead for Lucid
Lucid’s recent third-quarter results showed troubling signs as losses escalated to $992 million, up from $631 million the previous year. While it’s common for new automakers to report losses during their growth phase, widening losses after three years of production raises concerns.
Production numbers tell a similar story; Lucid manufactured only 1,805 vehicles in Q3, a drop from 2,110 in Q2. Although this represents a 16% increase from last year, it is modest and forecasts for 2024 suggest only a slight bump to 9,000 vehicles, marking less than 7% growth from 2023.
To raise desperately needed funds, Lucid sold nearly 263 million shares in a public offering and tapped its key backer, Saudi Arabia’s Public Investment Fund, selling an additional 374.7 million shares. These moves netted around $1.67 billion, enough cash to sustain its operations through 2026.
While funding is common for start-ups, Lucid’s significant cash burn, exemplified by a $992 million loss on only $200 million in sales last quarter, leaves unanswered questions about whether further financial help might soon be required.
With disappointing production and growing losses, Lucid currently struggles to attract investor interest.
Tesla Maintains Competitive Edge
Tesla remains a prominent player in the EV market, despite facing increasing competition. Rivals from China and traditional U.S. automakers are gaining ground, yet Tesla’s position is still robust.
In its third quarter, Tesla’s sales climbed 8% year-over-year to $25.1 billion, while non-GAAP earnings per share rose by 9% to $0.72. Although revenue slightly missed analysts’ estimates, earnings exceeded expectations.
The company produced 469,796 vehicles, marking a 9% increase, with deliveries up 6% to 462,890 units. Though the growth rate is lower compared to what Lucid is achieving, Tesla’s sheer volume is remarkable for its scale.
Reports suggest Tesla might launch a lower-cost EV priced under $30,000 next year, which could boost sales further. Beyond new vehicles, Tesla’s plans to introduce a Robotaxi autonomous ride-hailing service and expand its Full Self-Driving features, which generated $326 million in Q3, point to additional revenue streams.
Conclusion: Tesla Outshines Lucid
Comparing Lucid and Tesla highlights a clear difference in maturity. Tesla’s ability to produce electric vehicles at scale as well as its profitability gives it the upper hand compared to Lucid, which is currently struggling.
Shares of Tesla currently trade at a premium, with a forward price-to-earnings ratio of 135, a stark contrast to the S&P 500 average P/E of around 30.7. However, unless Lucid can turn around its financial woes and increase production significantly, Tesla remains the preferred investment.
Is Investing $1,000 in Lucid Right for You?
Before purchasing stock in Lucid Group, it’s critical to note:
The Motley Fool Stock Advisor analyst team recently identified their top 10 best stocks for investment, and Lucid Group was not included. The stocks selected could potentially see substantial growth in the future.
For instance, had you invested in Nvidia when it appeared on this list on April 15, 2005, an investment of $1,000 would now be worth $855,971!*
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Chris Neiger 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 expressed here are those of the author and do not necessarily reflect those of Nasdaq, Inc.
