Lucid Group (NASDAQ:LCID), a luxury EV maker striving to establish its foothold in the challenging EV market, offered several positive takeaways in its recent Q3 report.
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The company achieved 2,781 deliveries during the quarter, marking a 91% increase compared to the previous year. This surge contributed to a 45.1% rise in annual revenue, which reached $200 million. Additionally, a 12% reduction in the cost of goods sold supported an improvement in gross margins, narrowing the deficit to -106% compared to -241% in the same period last year.
Lucid also reported a gross loss of $212.5 million for the quarter, a significant improvement from the $332 million loss recorded in Q3 of the previous year. On the earnings call, the company said that the cost optimization initiatives at the Arizona factory contributed to the improved performance.
During the quarter, Lucid brought battery enclosure manufacturing and various subassemblies in-house, with plans to fully transition powertrain production to on-site operations. These moves are expected to enhance logistical efficiency and streamline production. The company also began accepting orders and announced pricing for its upcoming Gravity SUV, with production slated to begin in just a matter of weeks, according to management.
Watching all this take place, RBC analyst Tom Narayan applauds management for its cost-control efforts and expresses optimism about the potential demand for the Gravity SUV. However, these improvements could be overshadowed by broader industry challenges, including policy uncertainty stemming from the Trump administration’s less supportive stance on EV adoption.
“With shares under pressure post-election and subsequent press surrounding the new administration’s desire to curb the IRA and in particular, credits to consumers for EV purchases, focus shifts instead to Lucid’s ability to strike licensing deals,” Narayan noted.
While the potential elimination of leasing credits would be a setback for Lucid, given the brand’s price point, most Lucid customers typically do not qualify for the standard non-lease credit due to income thresholds. On the licensing front, management stated it is actively engaged in discussions with various parties but prefers to wait until terms are finalized before announcing any agreements.
Meanwhile, in recent discussions with OEMs, Narayan says management teams have expressed a “desire to in-source tech,” particularly in light of macro uncertainties.
As such, until Narayan sees evidence of “deals being struck,” he has lowered his price target by ~$1/share, as he now ascribes “greater probability to lower penetration scenarios.”
Accordingly, Narayan’s price target falls from $3 to $2, suggesting shares will stay range-bound for the foreseeable future. Narayan’s rating stays a Sector Perform (i.e., Neutral). (To watch Narayan’s track record, click here)
5 other analysts join Narayan on the fence, while an additional 1 Buy and 2 Sells can’t detract from a Hold consensus rating. However, the $2.99 average target implies shares will climb 47% higher over the coming months. (See Lucid stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
