Lucid Shares Collapse

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24/7 Insights

• After a recent run, Lucid Group Inc. ( NASDAQ: LCID ) stock has reversed course.
• Tiny production numbers suggest the EV maker will have to raise money again soon.

After a surge triggered by management's comments that its $1 billion deal with the Saudi Arabia Public Investment Fund had started to yield results and posting production numbers slightly better than expected, Lucid Group Inc. ( NASDAQ: LCID ) posted a sharp sell-off that took the stock down by almost 16% in a single trading day. Investors may have examined the recent news and found nothing truly encouraging.

The Trouble With Lucid

Lucid has lost its way.

While investors liked Lucid’s second-quarter production numbers at first, those numbers were tiny. Production totaled 2,110, and deliveries hit 2,394. These are not enough to show that Lucid can break even anytime in the foreseeable future. That means it will need to raise more money, which could cause dilution and cause the stock to sell off further.

Lucid announces quarterly results on August 5 and will post another loss in the hundreds of millions of dollars. In the most recently reported quarter, revenue rose from $149 million in the year-ago quarter to $172 million. Its operating loss was $772 million last year and $730 million in the recent quarter. At its current burn rate, it needs more money.

Lucid faces the same barriers as every EV maker. Many buyers are worried about the distance EVs will go on one charge, the number of charging stations, and the price of the cars. Lucid certainly has a price challenge. The price range of Lucid’s vehicles is $70,000 to almost $90,000. Experts say the EV market can only grow if prices drop to $25,000. Major car companies, including Tesla, plan to come to market with vehicles in that range. Even at high prices, Lucid is up against EVs from BMW, Mercedes, Porsche, and Cadillac. ( See the top 10 EV brands right now. )

Eventually, and probably soon, Lucid's unit sales will need to rise to the tens of thousands each quarter. Today, it is not even close.

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