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Updated Lucid stock forecast for 2024 as shares soar on new PIF investment

Published 03/25/2024, 01:42 PM
© Reuters

Following a disappointing year-to-date performance, Lucid (NASDAQ:LCID) stock received a much-needed boost at the Monday market open after a major positive development for the luxury electric vehicle (EV) manufacturer. 

LCID shares were up more than 9.2% at the time of writing, trading at $3.02 apiece.

Why Lucid stock is up today

The rally in Lucid stock came after the luxury EV maker announced a $1 billion capital infusion from an affiliate of Saudi Arabia’s Public Investment Fund (PIF). The announcement sparked an early trading surge in the company’s shares by nearly 20% before paring some gains. 

This move underlines Lucid's strategic advantage to survive in the challenging EV sector. The Saudi Kingdom, holding a 60% stake in Lucid through the PIF, continues to channel billions into the company as part of its broader initiative to diversify its economy away from oil.

The investment will be made through the purchase of convertible preferred stock by Ayar Third Investment Company, a PIF affiliate, detailed in a filing with the U.S. securities regulator. This arrangement allows for the conversion into approximately 280 million shares. 

Facing headwinds like below-expected demand, the California-based Lucid aims to allocate the fresh funds for various corporate needs and capital expenditures. 

Last month, the automaker said in its Q4 financial presentation that it has enough liquidity "at least until 2025," with plans to invest $1.5 billion in 2024 and the anticipated launch of its Gravity SUV later this year.

What analysts are saying about Lucid shares 

In response to the announcement, analysts on Wall Street voiced their initial reactions on how the fresh capital infusion could affect Lucid stock.

In particular, Morgan Stanley analysts said the PIF’s investment was slightly lower than anticipated, equaling the investment giant’s forecast of the free cash flow (FCF) loss for the first half of 2024. 

For the full fiscal 2024, analysts expect a cash burn of $2.6 billion for the carmaker. Similarly, Morgan Stanley said it also expected that the new capital would come earlier. It has previously projected $1.5 billion of proceeds from the sale of a convertible note in the third quarter of 2024. 

In terms of PIF’s overall show of support for Lucid, analysts described it as “modest positive.”

”LCID’s largest shareholder has underpinned recent capital raising activity to date. We had begun to question the continuation of support given a range of other EV-related alternatives in the market,” they said.

“Today’s announcement helps reinforce commitment,” added analysts.

Also commenting on the investment, Stifel analysts said the PIF’s stake in Lucid stock would surge to roughly 64.1% upon conversion. 

“In our view, the deal highlights PIF's commitment to LCID's strategy and is a plus for the shares,” they noted.

Lucid stock forecast

While backing from its major shareholder is crucial, Lucid stock’s enduring success hinges on the company’s capacity to manufacture vehicles at a bill of materials (BOM) cost that falls below the selling price, Morgan Stanley’s analysts said. 

They also emphasized the importance of launching the Gravity model profitably and in a capital-efficient manner and exploring other opportunities “to extract value from its exciting IP and technology portfolio.“

Despite today’s gains, Lucid stock remains down roughly 30% since the start of 2024. 

From the technical point of view, the next resistance sits around $3.70 in the form of the 100 DMA. A break of the $3.50-3.70 zone would open the door for a push towards the $4 handle. 

On the downside, the return to the record lows near $2.50 remains a fair possibility given the depressed sentiment surrounding EV makers.

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