Luxury EV Maker Lucid Group Shows Promising Potential

Lucid Group (LCID) went public last July via a SPAC reverse merger. Lucid Air, the company’s luxury sedan EV line, has merited much attention because of its ability to travel over 450 miles on a single battery charge.

Lucid recently received the 2022 MotorTrend Car of the Year Award. The company only began production of its EV models during Q3 2021.

Since October, the company’s stock price has been on an uptrend and it currently trades above $55 per share, representing a more than 50% gain over the past month. I am bullish on the stock. (See Analysts’ Top Stocks on TipRanks)

MotorTrend Car of the Year, Current Operations

The company received the 2022 MotorTrend Car of the Year Award in November. It is the first time a company has received such a prestigious award with so few units in production. The company’s base model, Lucid Air, comes in six different trim packages.

Lucid Air has gained EPA certification, which confirms that the vehicle can travel over 450 miles on single charge. The company’s forthcoming Dream Edition R is rated, also by the EPA, at traveling 520 miles on a single charge.

These statistics put Lucid Motors in the lead amongst current EV producers. Lucid builds its own batteries and powertrains, which gives it an advantage.

The company manufacturers its vehicles at its Advanced Manufacturing Plant in Casa Grande, Arizona. Lucid has plans for a 2.85-million square feet expansion to its manufacturing facility. The current facility can produce about 34,000 units per year, which represents between $2.38 billion and $3.4 billion in potential yearly revenue.

Lucid has opened 13 retail stores and service centers in preparation for the launch of Lucid Air. The company has plans for new retail locations and operations in Canada and China. Lucid will soon introduce additional models, including Grand Touring, Touring, and Pure models.

Q3 2021 Results, Future Valuation

Lucid recently reported its Q3 2021 results, which allowed first insight into the company’s financial performance. Lucid only began vehicle production during Q3, so the company’s revenue of $232,000 does not represent its true potential.

The company reported more than 13,000 reservations during Q3, which amounts to around $1.8 billion in future revenue. Current customer reservations are more than 17,000.

The company estimates that it will produce 20,000 units during 2022, which amounts to between $1.4 billion and $2 billion in potential revenues. By 2023, Lucid estimates that it will be able to produce 90,000 units per year, amounting to between $6.3 billion and $9 billion in potential revenue.

It is unclear what the company’s gross profit and net income will be for these production years. Lucid’s valuation will drastically increase as these revenue streams come to full steam.

Lucid raised $4.8 billion in proceeds from going public. It currently reports $6.1 billion in assets versus $1.3 billion in liabilities. The company has an abundance of financial resources to fulfill its current business operations and strategy.

Accordingly, we should expect the company’s overall valuation to grow from year to year as production and sales increase. The hope it that its stock price continues to rise along with the growing valuation.

Wall Street’s Take

According to Wall Street, Lucid has a Moderate Buy consensus rating, based on two Buys and one Sell assigned in the past three months.

The average Lucid price target is $44.33, which implies 20% downside potential.

Conclusion

Lucid went public last July to much fanfare. The company was recently awarded the 2022 MotorTrend Car of the Year Award, and expects to ramp up production in 2022.

The company will see higher revenue streams, estimated to be up to $2 billion. The company’s valuation will increase and it is likely that its stock price uptrend will continue.

Disclosure: At the time of publication, Alan Sumler was long on Lucid Group.