Is Lucid Stock a Buy?

Lucid Group (NASDAQ: LCID) is making waves in the luxury electric vehicle (EV) market with an impressive driving range that sets it apart from competitors. The company made its public debut just three years ago and is positioning itself as a challenger to Tesla with its upscale EVs.

However, the journey hasn't been without its hurdles. The ramp-up in production has taken longer than anticipated, and the company has had to secure additional capital several times to sustain its operations. After peaking at $57.75 per share in late 2021, Lucid's stock has declined by 96% and is now trading at around $2 per share.

If you are considering purchasing shares of this struggling electric vehicle company, there are some important things you should know first.

Lucid looks to revolutionize EVs with exceptional range and performance

Since its inception in 2007, Lucid has carved out a niche in the electric vehicle market, targeting those who seek luxury combined with cutting-edge technology. What makes Lucid's offerings stand out are their remarkable range and performance. Take the flagship Lucid Air Pure, for instance, which delivers 430 horsepower and a range of 419 miles and is priced at $69,900.

For those looking to elevate their driving experience, the Grand Touring model has a range of 516 miles and fast-charging capabilities that can provide an additional 200 miles in just about 12 minutes.

Image source: Lucid.

The company's strong foundation is bolstered by substantial backing from the Public Investment Fund (PIF) of Saudi Arabia, which has invested billions since 2018. Lucid also has a strategic partnership with Aston Martin, granting the automaker access to its advanced powertrain and battery systems. In exchange, Lucid received equity in Aston Martin and $99 million in cash to be realized over the next few years.

The automaker has faced challenges and continues to rack up losses

Lucid Motors' technological advantage sets it apart, but it has been a long and arduous journey for the automaker. When the company first went public, it projected that vehicle sales would be around 49,000 in 2023. Instead, the company ended up manufacturing 8,428 vehicles and delivering 6,001 last year.

One pressing concern for Lucid is its cash burn rate. Through three quarters of this year, the company's revenue was $573 million, up 31% from last year. However, expenses were around $2.9 billion, and the company's operating loss was a staggering $2.3 billion.

LCID Free Cash Flow (Quarterly) data by YCharts.

For a young, pre-profit company like Lucid, securing funding and having enough liquidity to fund the business is essential for its survival and long-term growth. The company has raised capital several times through public equity offerings and investments from Saudi Arabia's PIF.

In October, Lucid sold 262.5 million shares priced at around $2.66 per share, raising $719 million. In addition, the PIF invested another $1 billion in Lucid, bringing its total investment to $8.9 billion since 2018. At the end of the third quarter, Lucid had over $5 billion in liquidity, providing it with a financial runway through 2026.

Is Lucid a buy?

Lucid is an innovator in the EV space, and its focus on luxury vehicles could help it overcome challenges in the EV market today. President-elect Donald Trump's transition team recently announced plans to kill the $7,500 consumer tax credit for electric vehicles. Lucid CEO Peter Rawlinson believes Lucid is the "most immune" to the federal tax credit cut thanks to its focus on technology and luxury.

Lucid has done an impressive job with its EV technology. It finally launched its long-awaited SUV model in early November and is taking orders for its Lucid Gravity Grand Touring model, priced at $94,900. The company is scheduled to begin production of the vehicle in late 2024, with its Lucid Gravity Touring model, a more affordable option at $79,900, beginning production in late 2025.

However, the company has not come close to the production goals it set several years ago. It also continues to burn capital at an alarming rate and dilute shareholders in the process. Given the circumstances, investors should steer clear of the stock until the company demonstrates significant progress in controlling its expenses and improving its bottom line.

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Courtney Carlsen 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.