Lucid Motors Q4 Earnings report is due February 28th and many are eager to see how the company has positioned itself for 2022. After disappointing Q3 results, LCID is looking to show itself as a real contender in the EV space after delivering its vehicles for the last few months. An ambitious company seeking to make a name for itself as a luxury EV brand, Lucid is competing with the likes of Rivian and Nio to become Tesla’s rival in the long-term. While its target audience and model is a departure from Tesla’s in many ways, many have questioned the company’s ability to compete in the space as legacy vehicle manufacturers enter the EV space. Now that LCID stock is down roughly 57% from its ATH, bullish investors are looking for a bounce off LCID’s support level depending on the company’s guidance.
Lucid Dream Production
In October 2021 the car company began delivering its 520 limited Dream edition vehicles and appears to have started on its 57 Grand Tourings to meet its goal of 520 deliveries for the year. Selling 520 Lucid Air Dream Editions starting at $169,000 per vehicle provides at least $87,880,000 in revenue for the quarter. The company gained $4.4 billion in net cash after merging with Churchill Capital IV and another $1.75 billion after a convertible senior-note offering. In Q3, Lucid generated $232,000 in revenue largely due to its battery packs for the Formula E race series. It’s worth noting that the majority of this revenue stream will appear in Q4 because of seasonal demand.
This puts LCID in a good place to grow and meet the 17 thousand pre-orders it has received so far although the company is only equipped to produce 34 thousand vehicles per year at its current plant. But Lucid is already working to expand its Advanced Manufacturing Plant (AMP-1) in Arizona with an additional 2.85 million square feet of manufacturing space. The expectation that Lucid will receive a growing number of pre-orders month by month has definitely bolstered expectations before earnings. However a pivotal piece of this earnings report will be the guidance provided for its sales growth.
Despite taking a major dip along with other tech sector stocks, LCID is looking bullish before earnings. Motortrend recently named the Lucid Air its Car of the Year highlighting LCID’s edge in the EV sector. Despite big names like Ford, Chrysler, and GM gaining considerable attention for their EV models which are expected to roll out over the next 18 months, most agree that these heavy-hitter’s will not be able to move fast enough to position themselves against the likes of Tesla and Lucid.
Compared to Tesla, LCID has yet to prove its metal. But LCID has burst onto the scene with a higher quality model which outperforms the Tesla Model S Plaid and Rivian R1T in terms of range. The company’s focus on quality has made many investors bullish on LCID’s future making it a long-term hold for many.
LCID Stock Investors
From a media standpoint, Lucid has been garnering a lot of attention thanks to the company’s public strategy. The Lucid Rally in October coupled with a growing community of investors and owners has brought new eyes to the stock. As proud owners join the company’s “Lucid Owners Club”, word of mouth will spread along with media coverage of its vehicle rollout and Lucid Studios across the country. Many investors are factoring this into their valuation of the stock which shows a strong support near $26 despite its recent dip to $24.
Much like TSLA, LCID has a devoted following of investors like Bear’s Workshop and many others who are watching every stage of the company’s production based on the stock’s growth potential and LCID’s applicability across tech, motor, and renewable energy sectors. But these investors aren’t the only ones attracted to the company. Although Lucid continues to operate at a loss, institutional investors like Morgan Stanley, Wells Fargo, Vanguard Group, and others have invested in this growth stock with many more opening positions ahead of earnings. However, this touches on a piece of controversy for the company since the $360 billion Saudi Arabian investment fund – the PIF – controls 61% of LCID’s outstanding shares.
Expansion
It could be said that Saudi Arabia is an active investor in the stock, but considering the PIF’s substantial holdings across the market it remains to be seen if LCID is a special investment. Looking towards the future, LCID plans on opening a plant in Saudi Arabia in 2025 or 2026 which matches the nation’s vision for a high-tech, green energy future. However, the initiative to build a site at the King Abdullah Economic City appears to rely on a financial commitment from the PIF and many of the details will still need to be negotiated. Setting this new facility aside, Lucid has named the Middle East as a target for expansion this year which presents significant obstacles considering the poor infrastructure in place.
Meanwhile, Lucid is also planning its European expansion which will begin this year as well. Initially targeting Germany as the starting point for its deliveries, Lucid then hopes to establish a presence in Austria, Belgium, Denmark, Finland, France, Iceland, Italy, Monaco, Netherlands, Norway, Spain, Sweden, and Switzerland. As early as 2023, Lucid is hinting at expanding into China to capitalize on one of the hottest, emerging EV markets.
LCID Stock: Vehicle Recall
This expansion could lead to a significant increase in pre-orders and eventually deliveries which presents a notable upside for investing in the manufacturer. But the way forward presents undeniable risk. Lucid has already issued a recall of over 200 vehicles due to the chance that part of the suspension was assembled improperly by its supplier. While there have been no incidents so far, the company expects that about 1% of the 203 potentially affected cars could have a flaw in the installation of this part.
LCID Stock Forecast
Considering the number of recalls Tesla has issued – with over 10 in the last four months – Lucid’s expansion and production plans are highly variable. If the company fails to meet its ambitious yearly targets its stock will suffer the consequences. As is, pre-orders could exceed its yearly capacity, but by 2023 the company is projecting 50 thousand vehicles and intends to begin production on its luxury SUV – Project Gravity. Barring any hiccups, the company will be able to produce 90 thousand vehicles per year at the AMP-1 after completing its expansion and Lucid will be Free Cash Flow positive by 2025.
Expanding to other markets could make Lucid profitable more quickly, but in the long-term most experts point to Lucid’s difficulties scaling. Tesla has been busy securing the infrastructure for its own lithium-ion battery manufacturing as well as raw materials agreements to sustain its battery supply chain. Demand for lithium, cobalt, and nickel will only increase as major EV manufacturers ramp up and Lucid is not yet on a path to manufacturing its own batteries despite batteries making up roughly 32% of the cost for an EV on average.
On the other hand, Lucid is in a position to benefit from the political impetus for electric vehicles. President Biden has made EV policies an integral part of his platform, saying that “China has been leading the race up to now, but this is about to change”. The administration recently released the National Electric Vehicle Infrastructure Formula Program as part of its infrastructure package which would allocate $5 billion for electric vehicle charging stations over five years. Another $2.5 billion is reserved for discretionary grants for corridor and community EV charging but the guidance for this funding will be revealed later this year.
If it passes this could be a catalyst for EV manufacturers like Lucid which will no longer have to develop the entire infrastructure for public charging stations as Tesla had to.
Q4 Earnings Report
As for its Q4 earnings report, Lucid will need to report a loss per share below 30 cents to beat market expectations for Q4. This is especially pivotal considering that in Q3 the company failed to beat expectations of a 25 cent loss per share – exceeding them by 16 cents instead. Expectations for Q4 revenue ranges from $83 million to $36.74 million.
LCID stock is already down roughly 57% from its all time high which is to be expected since the stock was widely considered overvalued in comparison to other manufacturers upon its IPO. With a $43 billion market cap, LCID is still pricey given its low production so far. Depending on the results of its earnings report, the stock could drop even lower than the current LCID stock price of $26.33. But is this an overcorrection?
A myriad of factors such as inflation, interest rate increases, geopolitical conflicts, and supply-chain disruptions have been affecting tech stocks across the board. But more recently, LCID stock took a hit from the announcement of its vehicle recall and the expiration of its share lockup in January. This meant that 74% of Lucid’s shares which were previously held in lock-up became available for selling – ultimately contributing to greater volatility for the stock amidst a decline for growth stocks.
Currently trading at $26.33, LCID shows a support at its recent low of $23.38 with a resistance near $30.06. Despite the sell-off at the end of January, accumulation is showing an uptick, the MACD is bullish, and the RSI is moving up from 58. All together, these indicators show a bullish sentiment heading into earnings. Yet short interest has been increasing, and as of January 31st reached 17.5%.
LCID Stock Price Predictions
Analysts’ predictions for this stock vary greatly with Morgan Stanley coming in at the low end with a $16 price target after siding with Rivian over Lucid following a client survey. But as its analyst – Adam Jonas – shared, “An investment in either company requires a need for long-term thinking and preparation for significant potential volatility around the ramp to high volume manufacturing.” Pointing to LCID’s 30% free float, 17% short base, and high retail component as well as the bullish market sentiment for LCID’s growth potential, the investment bank ultimately predicted that Lucid will not meet its 2030 production targets or its goal of a 15% EBITDA margin over the long term.
Meanwhile, Guggenheim analyst Ali Faghri gave a $38 price target in December citing that in the near term “EV adoption may fall short of industry forecasts, particularly in the US due to a less onerous regulatory backdrop and limited product launches in key market segments.” This coupled with insufficient domestic charging infrastructure and battery capacity posing near-term bottlenecks, led the bank to give a target more or less at its share price at the time.
On the high end, Bank of America gave a $60 price target as its analyst – John Murphy – predicts that Lucid will become a legitimate threat to current EV makers and legacy automakers calling it the “Tesla/Ferrari of new EV automakers”. Clearly, Murphy used a premium to establish the multiples for his price target compared to average multiples from electric vehicle manufacturers. This means that BofA doubled its original price target of $30 and its not alone in this high valuation. Citi has given a price target of $57 noting upcoming catalysts such as a ramp of manufacturing, Air launch timing updates, and financial results.
Considering the positive sentiment towards EV manufacturers and Lucid’s long-term potential, with good guidance LCID stock could pick up after the release of its Q4 earnings report at 5:30 ET.
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