Lucid Group Bottomed, But The Outlook Remains Cloudy

Key Points

• Lucid Group is falling after weak results, but the downside is limited. 
• Analysts are capping upside potential but still rate it at Hold and see it moving higher. 
• Liquidity concerns are clouding the outlook. 

Lucid Group NASDAQ: LCID bottomed earlier this year on news the Saudi Sovereign Wealth Fund was buying a stake. The stock has retreated from the highs set following the announcement, but new lows may not be coming. The charts show support at higher levels than in January, and the company could succeed despite a lackluster Q1 report. The company’s Q1 results were not rally-inspiring, but this is not surprising in the OEM EV startup world; it would be more surprising if the company had no issues ramping production. Production and deliveries will ramp up in the coming quarters, and profitability will come. The question on the minds of analysts is if the company has enough cash to bridge the gap until then. 

Lucid Group Has Stunning Quarter, But It’s Not Enough 

Lucid Group had a genuinely stunning quarter, ramping production and deliveries to grow revenue by triple digits. The $149.43 million in revenue is up 159.1% compared to last year, but it missed the consensus estimate by a wide margin which is part of why share prices are down. The analysts expected closer to $212 million on a higher delivery rate, which amounts to 3000 basis points of underperformance. 

The company made 2,314 vehicles in the quarter but delivered only 1406 compared to 1835 expected by analysts. The shortfall is partly due to production hiccups, but an element of demand is underlying the weakness. Among the concerns posted by analysts is that the window of opportunity to entice consumers to the brand is closing as the cash position dwindles. This news is consistent with that. On the bottom line, the -$0.43 in GAAP losses missed by $0.07. 

The guidance is favorable but did little to bolster confidence among analysts. The company says it is on track to make 10,000 vehicles in 2023 and is progressing on initiatives to ramp capacity as needed. The balance sheet is also in decent shape, considering the lack of positive cash flow and has $3 billion in cash and equivalents and $4 billion in liquidity. This is expected to keep operations going until the 2nd half of 2024, when profits will be present, or additional funding will be needed. 

Analysts Hold Lucid, See Double-Digit Upside 

The 8 analysts rating Lucid on Marketbeat.com’s analyst tracking page have the stock pegged at Hold with a price target about 40% above the current price action. The bad news is that sentiment and price targets are slipping and may weigh on the price action over the coming months. 

The takeaway from the post-release chatter is that Lucid has value; it is the most attractive of the EV OEM startups and owns key pieces of EV technology. The problem is that the results are disappointing and leave a lot of uncertainty regarding capital, liquidity and the need to raise more funds. In the eyes of Bank of America, which has a Neutral rating on the stock, it could take until 2027 for operating cash flow to break even; this company may need to raise up to $10 billion more to make it there. 

Institutional activity is helping the stock to bottom and may keep it moving sideways in the near to short-term. The institutions have bought nearly $1.3 billion in shares in the last 12 months, outpacing selling by nearly 10-to-1. They own only 12% of the stock, but it is growing. 

The Technical Outlook: Lucid Is Rangeboud 

Shares of Lucid are down about 8% and may move lower, but the charts show a range-bound market. The bottom of the range is near $6, where Saudi Arabia may step in to buy more. If not, this stock could fall through support and hit lower lows, which is not expected now.