Lucid investors seek clarity; downtrend intact, new lows ahead

Key Points

• Lucid Group had a weak quarter and cut guidance. 
• Analysts are lowering their targets and cutting sentiment ratings.
• High short interest suggests the downtrend will continue and new lows are on the way. 

Lucid Group NASDAQ: LCID investors are looking for clarity after the company reported a weak Q3. The would-be Tesla killer is struggling to gain traction in a market with rising demand but an oversaturation of its target model. Additionally, the cars' price point and the company’s lean into price cuts impact results. The combined effect is a weak guide for Q4 and little hope for strength in 2024. Because the short interest is high at 25% and the odds of another weak quarter are also high, there is a high probability the downtrend will continue, and this stock will set lower lows soon. 

Mixed results are no balm for Lucid investors 

Lucid did not have a wholly horrible quarter, but there is little in the report to soothe frayed investor nerves. The company’s revenue of $137.8 is down 30% compared to last year and missed the consensus estimates but came with a narrower-than-expected loss. The bad news is that revenue fell 30% on increased production and deliveries, which does not bode well for future growth and profitability. Deliveries topped 1,450 in Q3 2022, up only 59 cars YOY or about 4%. 

Other EV manufacturers, such as Rivian NASDAQ: RIVN, are in a better position with higher demand and less saturation. Its Q3 report included better-than-expected top and bottom-line results, a narrower loss, increased guidance, and an end to its exclusivity deal with Amazon. 

Lucid's loss was better than expected due to internal improvements and lower costs associated with tepid production. The company’s GAAP loss came in at $0.28 for the quarter, up $0.12 from last year and $0.12 better than expected, but this isn’t enough to get the company to profits. With production and guidance shrinking, the odds are high that this company’s profitability will come later than expected. As it is, profitability isn’t expected for several more years. 

Lucid cuts guidance; 2024 forecasts are high

Regarding guidance, the company cut its full-year production guidance to a max of 8.5K, down 15% from the previous 10K forecast. The cause is tepid demand; the company is “prudently” curbing production to match deliveries, which suggests weakness will persist into 2024. In this scenario, the robust consensus forecast for 2024 is much too high, expecting a 200% increase in sales. 

2024 sales should ramp higher; the question is by how much. The Lucid Gravity is expected to hit the market sometime next year and may provide a lift for the company. The issue is that its position in the luxury market may be a hindrance given the expanding dominance of Rivian. Starting prices for the Gravity are expected to run 30% to 50% higher than the entry price for Rivian’s R1S. 

Analysts trim targets for Lucid, reducing their holdings

The analysts' activity in Lucid is bearish, and nothing has changed in the 1st 12 hours since the Q3 release. So far, Marketbeat.com is tracking 3 revisions, which include a reiterated Buy with a price target of $5 and 2 downgrades to Hold. The consensus rating is Reduce, with a target of $6.50 trending steadily lower. Based on the results and outlook, the downtrend in sentiment and price target should be expected to continue and may not end until sometime in 2024. 

Lucid Group shares fell more than 6% following the Q3 release and are testing support at the historical low. If the market can not recover from this decline and sets a new low, an even lower low should be expected. In this scenario, shares of LCID could fall into the $2 to $4 range before hitting bottom.