Lucid Logs Record Q3 Deliveries: Is This Penny Stock a Buy Now?
Electric vehicle (EV) maker Lucid Group LCID set a new record for vehicle deliveries in the third quarter of 2024. It delivered 2,781 vehicles in the September quarter, marking the third consecutive quarter of record deliveries. This brings LCID’s total deliveries so far this year to 7,142, surpassing the 6,001 units delivered in 2023. Hefty discounts are making the vehicles more affordable and driving Lucid’s deliveries. For instance, LCID is offering up to $17,500 in savings on the 2024 Air Grand Touring and making Air Pure more accessible with leases under $550 per month.
Further, the company is betting big on its upcoming electric SUV, Gravity, set to be launched later this year. As Lucid’s deliveries pick up pace and the company gears up for its next growth stage, should you consider placing bets on the stock while it’s still under $5? Let’s dive into the company’s performance, growth drivers and potential challenges.
What’s Working in Lucid’s Favor?
For starters, Lucid's deliveries are on track to grow significantly this year. The company has also set ambitious plans to diversify its lineup. Beyond the luxury Air sedan, Lucid plans to roll out its new Gravity SUV late this year. The SUV will have access to Tesla’s TSLA NACS charging connector, with more than 15,000 Superchargers available to Lucid owners.
Lucid also plans to introduce a mid-size electric crossover by 2026, with a starting price under $50,000, making it a direct competitor to Tesla’s Model Y. This lower-priced vehicle will be the first of three new models expected to be launched in the coming years. Lucid’s competitive advantage will be its next-generation powertrain, the Atlas unit, which the company claims will offer the same range as competitors while using a smaller, more efficient battery.
Finally, the company is backed by Saudi Arabia’s Public Investment Fund (PIF), its largest shareholder, which holds over 60% of Lucid’s outstanding shares. It has provided critical financial support to LCID to run its operations and invest in new EV offerings. The company exited the second quarter of 2024 with $4.3 billion in total liquidity and received another $1.5 billion funding commitment from a PIF affiliate in August 2024. The company anticipates the cash to support its operations until at least the fourth quarter of 2025.
The Zacks Consensus Estimate for LCID’s 2024 revenues is pegged at roughly $760 million, implying 28% growth year over year. The consensus mark for loss per share is pegged at $1.27, narrower than $1.36 incurred a year ago.
Hurdles in LCID’s Path
While Lucid’s deliveries are climbing, the company’s production numbers are not very impressive. Lucid produced only 1,805 vehicles in the third quarter, a decline of more than 14% sequentially. With 5,642 cars manufactured in the January-September timeframe, Lucid will need to significantly ramp up production in the fourth quarter to meet its production target of 9,000 vehicles in 2024. Notably, LCID’s close peer Rivian RIVN recently cut its 2024 production target amid supply parts shortage. It now expects to manufacture 47,000-49,000 vehicles this year, down from its previous forecast of 57,000 units.
Lucid’s reliance on incentives to boost deliveries also poses risks. Generous discounts, such as slashing up to $17,500 off vehicle prices, have helped Lucid increase demand and squeezed its already thin margins. The starting price of Air Pure, for example, now starts at around $70,000, which is cheaper than Tesla’s Model X. These pricing moves suggest that Lucid is struggling to maintain its luxury positioning in the market and lacks the pricing power to compete effectively with Tesla.
Another concern is Lucid’s cash burn and over-dependency on external funding. The company posted a negative free cash flow of $741.3 million in the second quarter of 2024. Although that’s an improvement from a negative FCF of $904 million in the year-ago period, it’s still a considerable cash burn. There’s no denying that the infusion of cash from the PIF has helped Lucid stay afloat but its long-term viability remains questionable. As Lucid continues to burn through cash, it will need to prove it can ramp up production and achieve profitability, particularly as the EV market grows more competitive.
LCID Stock’s Price Performance and Valuation
Lucid’s stock has not failed to meet its promises since going public in 2021. After setting lofty goals of delivering 20,000 vehicles in 2022 and 49,000 in 2023, Lucid managed to deliver just 4,369 and 6,001 vehicles, respectively. The company’s stock has plunged nearly 85% over the past three years. Year to date, it has dropped 20%, underperforming the broader industry, sector and S&P 500.
YTD Price Performance
Image Source: Zacks Investment Research
At its current price-to-sales (P/S) ratio of 6.34, Lucid’s stock appears pricier than Rivian, which has a P/S ratio of 1.89. Despite its low share price, Lucid is still valued relatively high, making it a potentially risky bet for value-conscious investors. The stock has a Value Score of F.
Image Source: Zacks Investment Research
Last Word
Lucid has made strides in 2024, breaking delivery records and setting the stage for future growth with new models. Backed by Saudi Arabia’s PIF, the company has the financial runway to sustain its operations for at least another year. However, its heavy reliance on external funding, ongoing cash burn and production struggles raise red flags for potential investors.
While the upcoming Gravity SUV and mid-sized crossover could help Lucid gain traction in the EV market, the company still needs to prove that it can ramp up production and operate efficiently without constant price cuts and incentives. Investors looking for a high-risk, high-reward opportunity may find Lucid appealing, but those with a lower risk tolerance may want to sit on the sidelines for now.
LCID currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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