Lucid Stock Soars: Is It Time to Invest?

Lucid (NASDAQ: LCID) is experiencing significant gains in its stock price today. As of 3 p.m. ET, shares were up by 13.4%, even reaching an impressive peak of 15.4% earlier in the trading session.

The surge in Lucid's stock valuation follows the launch of new analyst coverage. Recently, Benchmark analyst Mickey Legg issued a note indicating a buy rating for Lucid, along with a one-year price target of $5 per share.

Currently, this price target suggests a potential upside of about 52%. In his optimistic analysis, Legg highlighted an improved outlook for electric vehicle (EV) production this year and projected acceleration in 2026 and 2027. He believes that factors such as Lucid's advanced technology, well-rated vehicles, and financial support from Saudi Arabia's Public Investment Fund (PIF) could drive the company's success in the EV market, potentially leading to strong capital appreciation.

Should You Buy Lucid Stock?

Investing in Lucid stock presents a high-risk, high-reward opportunity within the EV sector. Despite receiving favorable reviews for its vehicles, which offer competitive performance, the company is currently facing substantial losses. Transitioning to profitability will depend on achieving improved economies of scale.

In its latest business update, Lucid reported that it produced 9,029 vehicles and delivered 10,241 vehicles last year. Comparatively, the company produced 8,428 vehicles and delivered 6,001 vehicles in the previous year. With the recent launch of the Lucid Gravity SUV, the company anticipates ongoing growth in production and deliveries. However, a significant increase in output will be necessary to make vehicle sales profitable.

During the third quarter, Lucid reported a net loss of approximately $992.5 million against revenue of about $200 million. Although it ended the third quarter with roughly $5.16 billion in liquidity, the company is burning through cash rapidly. The Saudi PIF, as Lucid's largest stakeholder, has demonstrated a willingness to invest heavily in the business. This means that access to capital may not be an immediate concern, though investors should prepare for possible stock dilution.

While Lucid is producing quality vehicles and seems to have stable financial backing, it remains uncertain whether its cars will capture enough market share to achieve profitability. Moreover, stock dilution could apply downward pressure on the share price. For investors who can tolerate high risk, Lucid stock might warrant consideration. However, for many investors, the current volatility and today's significant gains do not necessarily indicate a change in the company’s fundamental outlook.

Note: The author has no shares in any of the stocks mentioned in this article.

Lucid, Stock, EV