Lucid Is Skyrocketing Today. Is the EV Stock a Buy?

Lucid (NASDAQ: LCID) stock is posting huge gains in Thursday's trading. The electric vehicle (EV) company's share price was up 13.4% as of 3 p.m. ET and had been up as much as 15.4% earlier in the daily session.

Lucid's valuation is surging today following recent analyst coverage. In a note published yesterday, Benchmark analyst Mickey Legg initiated coverage on the stock with a buy rating and a one-year price target of $5 per share.

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As of this writing, Legg's price target implies additional upside of roughly 52%. In his bullish write-up on the stock, the analyst pointed to an improving outlook for EV production this year and acceleration in 2026 and 2027. He expects that the company's technology, highly rated vehicles, access to capital through Saudi Arabia's Public Investment Fund (PIF), and other factors will help Lucid succeed in the EV market and pave the way for strong capital appreciation.

Is Lucid stock a buy?

Lucid stock is a high-risk, high-reward play in the EV space. But while the company's vehicles have generally gotten strong reviews and offer performance advantages compared to many competitors, the business is posting large losses. A shift into profitability hinges on achieving much better economies of scale.

With its fourth-quarter business update, Lucid announced that it had produced 9,029 vehicles and delivered 10,241 vehicles last year. For comparison, the company produced 8,428 vehicles and delivered 6,001 vehicles in 2023. Thanks in large part to the recent launch of its Lucid Gravity SUV, the business should see continued growth for production and deliveries, but it will likely need to see dramatic expansion to get unit economics to the point where vehicle sales are profitable.

In Q3, the business posted a net loss of roughly $992.5 million on sales of roughly $200 million. While the business closed out Q3 with roughly $5.16 billion in total liquidity, it's using cash at a rapid pace. The Saudi PIF is the company's largest stakeholder and has shown that it's willing to invest heavily in the business, so access to cash may not be a big concern over the next several years, but investors can probably look forward to significant stock dilution.

Lucid is delivering quality products and appears to have solid financial backing, but it's not clear that its vehicles will be able to gain enough of a foothold in the auto market to make the business profitable. Additionally, stock dilution could put significant pressures on the company's share price. For investors with very high risk tolerance, the stock could be worth a nibble. But shares are probably too risky for most investors, and today's big gains aren't reflective of any shift in the company's fundamentals.

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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.