Lucid Group (NASDAQ:LCID) faces quite the headwinds in the EV sector, in terms of both production and pricing. In 2023, LCID stock only delivered 6,001 vehicles with a three-time price cut to boost sales. December was even more disappointing, with just 2,391 cars.
It’s no secret that Lucid is among the most troubled EV makers because of growing competition. Just look at its 23% fall in stock price so far this year. It makes sense for investors looking for big returns to consider gambling on LCID stock. But here’s why I don’t think that’s a great idea.
Wall Street Analyst Downgrades
Wall Street downgrades matter, whether investors like it or not. While some suggest these price targets mostly follow a company’s stock price up or down, analysts can provide certain insights. And while LCID stock has often moved contrary to analyst downgrades, this is a stock that’s certainly followed the trend.
Analyst Stephen Gengaro is among the analysts taking a bearish position on Lucid, recently lowering his price target. Others have followed, citing some of the same concerns I’ve pointed out for some time.
The uncertainty floating around LCID stock and its possible recovery in the face of unknowns about the EV industry is highlighted by InvestorPlace’s Faisal Humayon.It’s a piece worth reading, but essentially stems on the idea that EBITDA losses in combination with Lucid’s cash burn could push the company over the edge. There is a liquidity buffer Lucid has at its disposal. But until deliveries activity picks up, this is a stock with poor fundamentals that simply creates its own bearish narrative.
Temporary Boosts
At the Future Minerals Forum, Ludic Motors and Maaden Rolling Company, a division of the Saudi Arabian Mining Company, shook hands and signed a three-year supply agreement. This shows Madden’s commitment to providing the global energy transition. This is to be done by delivering premium aluminum sheets with diverse specifications.
At a capacity of 460,00 tons yearly, MRC, under Maaden, makes beverage cans, vehicle sheets, and can sheets. Analysts reduced forecasts, ringing alarm bells for investors about Lucid’s weakened position and advising selling to lessen future losses. Still, Lucid continued to strive to balance demand with production capacity.
More Bad News After Another
These sorts of positive catalysts are typically overshadowed by a myriad of other issues investors are clearly focusing more intently on. Case in point: the company’s fundamentals.
Lucid investors were hit with a net loss of $780 million in Q1 2023. This loss was exacerbated by news of a drop in preorders for the Lucid Air sedan and topped off with an 18% workforce cut because of financial strain. Q2 wasn’t better because of a more comprehensive net loss of $764.2 million and a price war against Tesla. By Q3, Lucid reported a staggering $631 million net loss.
Lucid’s CFO, Sherry House, threw in the towel in December, leaving as interim CFO. Q4 saw the company’s vehicle deliveries fall 10%, making its production forecast continue its fall. Lucid’s stock price dropped to rock bottom because of these dismal 2023 numbers.
Indeed, 2023 was far from a good time for LCID stock, but perhaps some investors may view this potential growth story as a buy at these levels. Don’t count me among them.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article.The opinions expressed in this article are those of the writer, subject to the InvestorPlace.comPublishing Guidelines.
Chris MacDonald’s love for investing led him to pursue an MBA in Finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative, long-term investing perspective.
