LCID Stock: Down 60% From Record Highs, Is Lucid Motors a Buy?

The ongoing sell-off surrounding the equity market has dragged share prices of electric vehicle stocks such as Lucid Motors (NASDAQ: LCID) lower in the last six months. At the time of writing, LCID stock is down 60% from all-time highs, allowing you to buy the dip. Let’s take a look at whether this high-flying EV stock should be part of your portfolio right now.

The bull case for Lucid Motors

In Q4 of 2021, Lucid Motors began production and shipments of the Lucid Air from its purpose-built factory in Arizona. The Lucid Air is the world’s first battery-powered vehicle with a range of over 500 miles on a single charge. The company ended 2021 with 25,000 reservations and $2.4 billion in potential sales.

Lucid Motors has an installed annual production capacity of 34,000 units and around 20 studio and service centers. At the end of December 2021, Lucid Motors had a cash balance of $6.2 billion while it expected to pump in $400 million in capital expenditures this year.

In 2022 the company disclosed plans to build its first international manufacturing facility in the Kingdom of Saudi Arabia, which will be ready by 2025. Further, Lucid Motor’s AMP-1 Phase 2 expansion is already underway and will expand its manufacturing capabilities to accommodate 90,000 units each year. In Q4 of 2021, Lucid Motors strengthened its balance sheet with the issuance of a convertible green bond offering that totaled $2 billion.

What next for LCID investors?

Lucid Motors reported revenue of $26.4 million in Q4 which included $21.3 million from deliveries of the Lucid Air Dream Edition. The company has already delivered 400 vehicles as of February 2022. It confirmed the 2.85 million square foot expansion of the Casa Grande manufacturing facility in Arizona remains on track and expects to manufacture and ship between 12,000 and 14,000 vehicles in 2022.

Company CEO and CTO Peter Rawlinson explained, “We are at the precipice of a global transition toward electric vehicles, and Lucid, with our leading technology and design, is at the forefront of one of the most significant transformations in mobility in generations…..Looking ahead, we're updating our outlook for 2022 production to a range of 12,000 to 14,000 vehicles.”

Lucid also remains on track to expand its footprint in Europe and the Middle East this year and estimates the manufacturing plant in Saudi Arabia to add $3.4 billion of value in the next 15 years.

Is LCID stock still overvalued?

Analysts tracking LCID stock expect the company to increase sales by 4,900% to $1.35 billion and by 190% to $3.91 billion. Comparatively, its loss per share is forecast to narrow from $4.92 in 2021 to $0.84 per share.

So, we can that LCID stock is valued at a forward price to 2022 sales multiple of 28.6x and a price to 2023 sales multiple of 9.7x which is still expensive. Further, considering its outstanding share count of 1.65 billion, Lucid’s total losses will be close to $3.5 billion in the next two years.  

The automobile sector is capital intensive which means Lucid Motors will have to burn billions of dollars to expand manufacturing facilities and benefit from economies of scale. Even EV giant Tesla (NASDAQ: TSLA) was close to bankruptcy in the last decade before it received funding and staged a turnaround.  

So, for Lucid Motors to keep outpacing the broader market, it will have to consistently beat Wall Street expectations and deliver robust quarterly results amid increasing competition and the entry of legacy players with vast resources and meaningful expertise.

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