Lucid’s Stock Price is Still in Reverse: New Lows Are Coming

Key Points

• Lucid had another tepid quarter with increasing cash burn, sending shares down 15%. 
• The company is capitalized now but will burn through it quickly, raising the risk of additional dilution. 
• Short interest is high and will weigh on the price action for quarters to come. 

Lucid’s NASDAQ: LCID stock price has been down-trending since 2021, and it is not over. The Q1 results aren’t horrible, but they did nothing to improve the outlook for growth, market domination, or profits. The results frightened the market because spending is rising, and profitability is as elusive as ever. Because competition in the EV market is heating up, cost is among the largest factors driving consumers, and Lucid cars are expensive EVs, it is unlikely Lucid will change direction soon. 

Lucid CEO Peter Rawlinson touted plans for a low-cost model to rival competitors like Tesla NASDAQ: TSLA, but this is most likely a pipe dream. Rawlinson thinks we could expect such a model, with a target price of $40,000, in 2026, which would be very difficult given the cost of engineering and hurdles to production. 

Tesla, the current EV market leader, is on the same track and has been for years but is still unable to produce such a vehicle. Tesla makes money and can sustain its operations unaided while leaning into the low-cost route; Lucid does not. Even if Lucid can bring a low-cost model to market by 2026, Tesla is projecting 2025 for its low-cost version, so it will likely retain its leadership position. 

Lucid Is Clearly Underperforming Expectations, Shares Fall 15%

Lucid did not have a terrible quarter, but the 15.6% revenue growth is 520 basis points shy of the consensus as incentives and price cuts dig into the top line. The company says it produced 1,728 vehicles and delivered 1,967, which aided the operating performance, but increased spending offset the gain. Increases in R&D and SG&A of 25% YOY led to a GAAP loss of 30 cents, a nickel shy of the consensus and expenditure is expected to remain hot this year. Spending is necessary to ramp up new vehicle development. 

Among the many concerns are capitalization. The company is well-capitalized today and received $1 billion in additional funding during the quarter, but it comes at a cost. The new funding and other dilutive efforts have increased the share count by 25% since last year, and more are coming. The balance sheet highlights include 504,450 shares of redeemable convertible preferred stock that weren’t there last year. Investors should expect further dilution because the company is in a cash-burning industry, has limited finances, and has billions of unissued shares. 

The share count and outlook for dilution are two reasons the short sellers are interested, and the short interest is high. The short interest rate was running near 30% at the last report and has likely remained unchanged. Because the company continues to burn cash investors should expect the short interest to remain high and to increase over time. The company is well-capitalized now, but the $700,000 in quarterly burns will eat through $5 billion in a matter of quarters; additional dilution could be on the table before the end of 2024. 

Analysts Could Put a Bottom in Lucid’s Market

Analysts' sentiment in Lucid soured to Reduce over the past few quarters and is unchanged now. However, the group has hesitated to make revisions immediately after the earnings release and views the stock as undervalued until it does. Marketbeat.com tracks 10 analysts with ratings on the stock, and they come with a consensus target of $4.35 and a low of $2.90. The $2.90 low target is above the current price action and may lead the market to rebound if left unchanged. 

Lucid shares are in a downtrend and may have reached the bottom, but there are risks for bulls; it could be a penny stock soon. The 15% post-release drop has the market set up to retest the recent low, and a new low may be set. The downtrend will be confirmed in that scenario and may extend to the low $2 range or lower. The MACD and stochastic favor a new low, which may come within days or weeks.