Clear group(NASDAQ: LCID) is an emerging electric vehicle (EV) company that has captured investor attention since its merger with a special purpose acquisition company (SPAC) three years ago. The luxury electric vehicles boast impressive driving ranges, and the company aims to take on industry giants Tesla.
While Lucid may benefit from growing demand for electric vehicles in the long term, the path to production has not been without hurdles. After peaking at $57.75 per share in late 2021, Lucid’s shares have suffered a steep 95% decline and are currently trading below $3 per share.
If you’re thinking of acquiring shares of this promising electric vehicle company, consider the following.
Lucid Group focuses on manufacturing luxury electric vehicles to pursue a more affluent customer base. The company aims to position itself as a premium brand in the competitive automotive industry with its commitment to delivering a high-quality driving experience.
A distinguishing feature of Lucid’s vehicles is their impressive range. The flagship Lucid Air Pure, priced at $69,900, offers an exceptional range of 420 miles and packs 430 horsepower. For those looking for even more performance, the Ground Touring model, priced at $110,900, has 819 horsepower and an impressive driving range of 510 miles.
In addition to its impressive range, Lucid’s fast-charging technology allows drivers to gain 200 miles of range in just 12 minutes, making it an attractive choice for long distances.
Image source: Lucid Group.
One thing Lucid does not lack is support. Since 2018, Saudi Arabia’s Public Investment Fund (PIF) has invested billions in the luxury EV maker. At the end of the third quarter, Lucid had more than $5 billion in liquidity, providing the company with sufficient funding through 2026.
The company also launched its highly anticipated SUV model, the Lucid Gravity Grand Touring, in early November and is taking orders for the EV SUV, which will cost $94,900. The company started production of this vehicle in December, which has an impressive driving range of 700 kilometers.
Lucid has solid backing from the Public Investment Fund and is making progress in rolling out new vehicles, which could make it an attractive buy. However, investors will want to consider the company’s financial situation before investing.
It’s been a difficult journey for the automaker and things haven’t gone exactly to plan. When Lucid first went public in 2021, Lucid management predicted it would produce and deliver 49,000 vehicles by 2023 and 90,000 by this year.
Last year the company produced 8,428 vehicles and delivered 6,001. This year, Lucid delivered 7,142 vehicles, including 2,781 in the third quarter, an increase of 91% from a year ago. The company says it is on target for 9,000 vehicles this year.
Lucid has had a slow increase in production, and another pressing concern for investors to consider is its cash burn rate. The company’s revenue for the first three quarters of the year rose 31% to $573 million. However, in comparison, expenditure continues to rise. This year, expenses were about $2.9 billion, and Lucid has a staggering operating loss of $2.3 billion. It lost a similar amount over the same period last year.
For an emerging pre-profit company like Lucid, financing is critical to long-term success. With no profit to reinvest in the business, it has had to raise capital from outside investors several times to stay afloat. This includes capital increases through public share issues and investments from the Saudi PIF.
In October, Lucid raised $719 million in capital by selling 262.5 million shares at a price of about $2.66 per share. The PIF invested a further $1 billion in Lucid, bringing the PIF’s total investment in Lucid since 2018 to $8.9 billion. This step provides Lucid with sufficient financing for a financial start until 2026.
LCID Revenue (TTM) data per YCharts
Since 2022, Lucid’s outstanding shares have risen from 1.65 billion to 2.32 billion, or 40%, as the company has repeatedly tapped the stock markets, diluting investors’ positions in the process.
Lucid Group’s luxury electric cars are pushing the boundaries of electric cars, and the company could benefit from the long-term tailwinds for electric cars. According to forecasts from consulting firm PwC, the number of electric vehicles in the US could reach 27 million by 2030 and 92 million by 2040. If Lucid can gain its footing and generate positive cash flows, it has a real opportunity to grow quickly as well. market.
The company is taking steps to contain costs, but needs further investment through share issues and the PIF to keep things going. While the company has a cash runway through 2026, I would like to see it make progress in improving its bottom line. Until then, investors should avoid or sell the stock until more tangible positive results are visible.
Consider the following before purchasing shares in Lucid Group:
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Courtney Carlsen has no position in any of the stocks mentioned. The Motley Fool holds and recommends positions in Tesla. The Motley Fool has a disclosure policy.
Lucid Group: Buy, Sell or Hold? was originally published by The Motley Fool
