Lucid Group (NASDAQ: LCID) saw its stock hit a new low during Thursday trading, closing down 4.7% for the day and reaching a downward swing of 8.3%, according to S&P Global Market Intelligence data. The plunge was attributed to news of Tesla slashing prices on its Model Y vehicle in several European markets by 5,000 euros (approximately $5,430). This ruthless pricing strategy followed substantial cuts on Tesla’s Model 3 and Model Y vehicles a week prior, indicating diminishing demand in the EV sector and projecting potential challenges for other industry participants, including Lucid.
Lucid’s Current Investment Appeal
Lucid, a relatively new contender in the EV market, went public through a SPAC merger in July 2021. After the recent market downturn, its stock now languishes around 95% below its peak value. Yet, the company’s valuation multiples still stand high, currently at approximately 4.6 times this year’s projected sales. Furthermore, Lucid remains a substantial distance from profitability, even under the most favorable business trajectory.
LCID PS Ratio (Forward) data by YCharts
In the third quarter of 2023, Lucid managed to generate $137.8 million in revenue from delivering 1,457 vehicles. The company concluded the quarter with approximately $4.4 billion in cash, equivalents, and short-term investments, but is experiencing a rapid depletion of its cash reserves. Lucid reported a net loss of approximately $752.9 million during the same period.
Lucid’s long-term prospects hinge on significantly scaling up vehicle production and sales, as well as sustaining its pricing power in the ultra-luxury segment. With Tesla once again slashing prices and major automakers like General Motors and Ford reducing EV production targets, Lucid appears set to grapple with weaker demand in the near future.
Risky Proposition for Investors
Despite facing substantial markdowns from its peak, Lucid remains a highly precarious investment. If the company manages to surmount impending challenges and edge closer to profitability, its stock could very well witness explosive gains from its current levels. However, it’s crucial for investors to recognize the formidable odds faced by the business, as the already battered stock may yet stumble further.
Before considering an investment in Lucid Group, investors should weigh the risks. The Motley Fool Stock Advisor team recently revealed their top 10 stock picks for the future, but Lucid Group was notably absent from their recommendations.
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