Lucid Group, Inc. (LCID) hasn't done much in the last six months.
The stock did dip to its 52-week low of $16.12 on September 1, but a sharp rally ensued, and LCID now trades at around $26. (See LCID stock charts on TipRanks)
I am bullish on Lucid, with multiple stock upside catalysts on the horizon.
The EV industry is likely to grow at a stellar pace over the next decade. At the same time, competition has significantly intensified. According to Bloomberg, there will be over 500 different EV models available globally by 2022.
It’s innovation that will set companies apart. Lucid Motors seems to be investing on that front. The Lucid Air Dream Edition R is the longest-range EV ever rated by the EPA. The car has 520 miles of range in a single charge.
It’s also worth noting that the Lucid Air Dream Edition has over 10,000 reservations. This potentially implies revenue visibility of $900 million. The first deliveries are likely to be fulfilled in 2021.
Ambitious Growth Plans
Lucid seems to be making elaborate plans for aggressive geographic expansion. The company already has an employee base of 2,300, with a presence in North America, Europe and the Middle East.
In terms of models, Lucid Air is expected to drive initial sales volumes. The company’s first SUV, Project Gravity, is expected towards the end of 2023.
In February, Lucid CEO Peter Rawlinson also indicated that a $25,000 car might be in the pipeline. While Lucid's initial models have been targeted towards the premium or luxury market, a mass-market car can be a potential game-changer.
Currently, Lucid Motors projects to earn revenues of $2.2 billion in 2022. The company expects to increase revenues to $13.9 billion by 2025. This seems to be an optimistic-case scenario.
However, considering the industry outlook, Lucid Motors is positioned to make inroads with a technology edge. The company already has 321 issued patents in the U.S. and internationally.
Funding Growth Unlikely To Be a Challenge
Even with optimistic growth estimates, Lucid Motors has guided for an extended period of cash burn. Between 2022 and 2024, the company expects to report negative free cash flow of $7.5 billion.
Currently, Lucid is only fully financed through 2022. This is a potential risk, as equity dilution would impact the stock.
However, if vehicle deliveries remain robust, the stock is likely to remain in an uptrend. It’s also worth noting that Lucid Motors plans to outsource its production technology to other original equipment manufacturers. This is likely to be another source of cash flow upside.
Wall Street’s Take
According to TipRanks’ analyst rating consensus, LCID stock comes in as a Moderate Buy, with two Buys and one Sell assigned in the past three months.
The average LCID price target is $23.33 per share, implying 9.7% downside potential from current levels.
The Final Verdict
Lucid is already opening multiple retail and service locations in the United States and Canada. The company plans vehicle delivery in Europe and the Middle East in the second half of 2022.
Encouraging initial deliveries can serve as a catalyst for stock upside. In the long-term, its SUV and potential mass-market electric car can be game-changers.
Company specific factors, coupled with a multi-year industry tailwinds, make LCID stock worth considering.
Disclosure: At the time of publication, Faisal Humayun did not have a position in any of the securities mentioned in this article.
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