Lucid Motors: Is This EV Stock a Buy Right Now?
Electric vehicle stocks have
taken investors on a volatile ride since the bear market of 2020.
Most EV stocks including Tesla (NASDAQ: TSLA)
surged to record highs
by the end of 2020 before investors
were worried about steep valuations resulting in a sell-off. One
electric vehicle stock that is flying under the radar is Lucid
Motors, a company valued at a market cap of $32 billion.
LCID stock went public earlier this year
via a SPAC (special purpose
acquisition company) merger with Churchill Capital Corp. The SPAC
deal raised $4.5 billion in equity capital. While Lucid Motors
(NASDAQ: LCID) stock
has more than doubled year to date it’s also down 66% from all-time
highs allowing investors to buy the dip.
A massive opportunity for Lucid Motors
The shift towards clean energy
solutions will gather pace in the upcoming decade and electric
vehicle manufacturers will be at the forefront of this transition.
Governments all over the world will continue to support this
nascent but highly disruptive market by investing billions of
dollars to create a robust infrastructure as well as by providing
subsidies to improve demand.
A report from Allied Market
Research has valued the global EV market at $162.34 billion in 2019
and this sector is forecast to touch $802.8 billion by 2027,
indicating a compound annual growth rate of 22.6%. We can see why
Lucid Motors stock is popular among retail investors.
Lucid Motors designs, engineers,
and builds electric vehicles but the company is still pre-revenue.
It owns a 500-acre property in Casa Grande, Arizona which offers
close proximity to an established transportation system as well as
strong support from regional governments.
Lucid Motors is building North
America’s first greenfield or purpose-built EV factory at this
location. Equipped with advanced production line equipment, the
facility will have an initial production capacity to manufacture
10,000 cars each year and more than 300,000 units annually with
What next for Lucid Motors?
Lucid Motors is yet to deliver a
single car to a customer but it’s currently developing an EV called
Lucid Air. It claims the Lucid Air is the quickest, longest range,
fastest charging luxury electric car in the world. Priced at a
minimum of $69,900 after tax credits, this EV has a range of over
500 miles on a single charge with a max horsepower of
Further, the company disclosed
the Lucid Air Dream Edition is fully reserved with reservations
surpassing 10,000. It remains on track to start deliveries by the
end of 2021 and is poised to generate $900 million in sales based
on the number of reservations.
At the end of June 2021, Lucid
Motors operated eight retail stores in the United States which will
be used as a point of contact for retail and after-sales service.
The company’s management plans to open additional retail and
service locations in the U.S. and Canada in the near
Lucid Motors is also looking to
accelerate around $350 million of planned CAPEX investment from
future periods into 2021-2023 in order to enhance manufacturing
capabilities. This increase in investment will allow Lucid Motors
to fasten manufacturing capacity for Lucid Air to capitalize on
expected demand as well as implement a dedicated Lucid gravity
general assembly line. Lucid Gravity is projected to launch by the
second half of 2023.
Why Lucid Motors stock will remain
Lucid Motors ended the June
quarter with a cash balance of just $558 million. As the automobile
industry is capital intensive, it will have to raise equity capital
multiple times which will dilute shareholder wealth at an alarming
rate driving LCID stock lower. It will be several years before the
company will post consistent profits.
Lucid Motors will also have to
compete with market leaders such as Tesla and legacy manufacturers
including Volkswagen and Audi in this space which means it will
have to spend significant resources on research and development,
making the stock a high-risk high-reward bet right now.
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