Lucid Group (NASDAQ:LCID) has been a brutal ride for investors, with shares plummeting 91% over the past three years as the company struggles to carve out a space in the ultra-competitive EV market.
But now, a shift is taking shape – one that even longtime skeptic Morgan Stanley analyst Adam Jonas is beginning to acknowledge.
“Following the announced/ongoing changes in leadership, we believe Lucid has opportunity to execute an AI strategy leveraging strategic/sovereign partnerships within the context of the urgency to develop onshore manufacturing capacity for BEVs as the ‘socket’ for the AI ‘brain,’” Jonas said.
So, what does that mean exactly? Well, in essence, AI needs physical machines to function, much like a brain needs a body. As AI and electric machines merge, the role of US manufacturing is being “fundamentally reexamined.” Manufacturing now makes up just 10% of US GDP, following decades of decline. Meanwhile, China is advancing in AI-powered automation, making US-based EV production increasingly important from a “geopolitical perspective.”
That brings to US Reshoring, which is driven by two key forces: the “entanglement of structural tech diffusion & rising protectionism.” Recent advancements in AI are lowering manufacturing costs while also fueling trade barriers. After 25 years of underinvestment, US manufacturing is primed for growth, presenting new opportunities for innovation and investment.
So, where does Lucid fit in? Jonas explains: “In our view, the Lucid Gravity SUV (currently being ramped) is far more significant as a demonstration of the company’s 2nd generation software defined vehicle (SDV) architecture which increases the opportunity for LCID to participate in AI-enabled autonomy through strategic partnerships.”
While Tesla remains the largest US-based EV maker and Jonas believes it is still well positioned to shape the future of US manufacturing in the AI era, other software-driven manufacturers also stand to benefit. “We believe the expected value of LCID’s technology and relationships has increased with our increasingly relevant electrified future,” the analyst goes on to say.
The company has developed several innovations, including its EV platform, proprietary powertrain (motor, inverter, transmission), battery pack, and software. As traditional automakers face increasing pressure to adopt EV strategies with tighter budgets, partnerships with companies like Lucid could become highly valuable.
Additionally, as a dedicated EV manufacturer with real-world experience, Lucid has successfully developed, launched, and serviced electric vehicles. This expertise positions the company to support potential partners in shaping and managing their EV strategies.
Furthermore, while Lucid can still license its advanced drivetrain technology to legacy automakers, Jonas thinks the real opportunity lies in partnering with AI/ADAS companies to enhance autonomy in software-driven EVs.
With these factors in mind, Jonas has upgraded Lucid shares from an Underweight (i.e., Sell) rating to Equal-weight (i.e., Neutral), while his $3 price target remains unchanged, implying a potential 39% upside over the next year. (To watch Jonas’ track record, click here)
The majority of the Street sides with the Morgan Stanley analyst’s take, as TipRanks analytics demonstrate LCID as a Hold (i.e., Neutral). At $2.38, the average price target suggests a modest 1% upside from current levels. (See LCID 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.
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