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Lucid Group (NASDAQ:LCID) is facing a rough road ahead in the EV sector, grappling with production challenges and pricing hurdles. In 2023, only 6,001 vehicles were delivered by LCID, necessitating a drastic three-time price slash to stimulate sales. The woes continued into December, with a mere 2,391 vehicles hitting the roads.
With fierce competition heating up, Lucid finds itself in a tight spot, reflected in its 23% stock price decline this year. The allure of high returns may tempt some investors to take a punt on LCID stock, but prudence suggests approaching with caution. Here’s why I advocate for steering clear of this turbulent ride.
Dim Outlook from Wall Street Analysts
The verdict of Wall Street analysts carries weight, regardless of investor sentiment. While market watchers may debate the impact of analyst forecasts on stock prices, their insights offer valuable perspectives. Despite occasional divergences from analyst downgrades, Lucid Motors’ stock movements have largely mirrored the analysts’ sentiments.
Analyst Stephen Gengaro is among the skeptics, recently revising his price target downward for Lucid. His stance is echoed by others, aligning with concerns I’ve long voiced. The uncertainty swirling around LCID’s recovery amidst EV industry turbulence, as highlighted by Faisal Humayon of InvestorPlace, underscores the precarious nature of this stock. Though a liquidity cushion exists, until delivery figures pick up, weak fundamentals will continue to script a bearish narrative for Lucid.
Short-Lived Boosts
At the Future Minerals Forum, Lucid Motors inked a partnership agreement with Maaden Rolling Company, a branch of the Saudi Arabian Mining Company. This alliance underscores Maaden’s commitment to the global energy shift, aiming to supply top-notch aluminum sheets tailored to varied specifications.
Operating at a production capacity of 460,000 tons annually, the Maaden Rolling Company is engaged in manufacturing beverage cans and vehicle sheets. Despite analysts scaling back projections, signaling warnings about Lucid’s vulnerability, the company persists in balancing demand with its production capabilities.
Continued Setbacks
Amid sporadic positive developments, Lucid grapples with a myriad of challenges that hold investor attention, with a primary focus on its fundamentals.
The grim financial picture included a $780 million net loss in Q1 2023, exacerbated by dwindling preorders for Lucid Air sedan and punctuated by an 18% workforce reduction due to financial pressures. Q2 presented no respite, with a more substantial net loss of $764.2 million and an ongoing price skirmish with Tesla. By Q3, Lucid posted a staggering $631 million net loss.
December witnessed Lucid’s CFO, Sherry House, stepping down, further casting shadows on the company’s trajectory. Q4 deliveries slumped by 10%, compounding woes as production forecasts continued to spiral. These dismal 2023 numbers drove Lucid’s stock to new lows, marking a challenging period for LCID shares.
While some may view the stock’s distress as a growth opportunity at current levels, count me out of that optimistic cohort.
