Since January, Lucid Group (NASDAQ:LCID) has bounced back from its all-time lows, yet only slightly. With this, some bottom-fishers may now believe LCID stock is favorably priced, after perhaps becoming oversold following the deflating of the EV stock bubble. A surge to $10 per share is unlikely, with signs pointing to a forecast of $1 or less per share.
That’s not to say one should expect Lucid to drop rapidly towards such a rock-bottom stock price. However, the factors driving this stock’s nearly 95% price decline from its all-time closing high hit during the stock’s early 2021 heyday ($58.05 per share) have not gone away. As these factors continue to persist, chances are this stock will stay on track to slide towards this disheartening price target.
LCID Stock: Down on Dilution and Disappointment
Among the myriad of red flags and concerns at hand with Lucid, there are two that stand out as having the strongest negative impact on shares: shareholder dilution, and the continued release of disappointing fiscal results.
Sure, as an early-stage company, depending on dilutive equity raises to both keep the lights on and to expand operations is par for the course. In fact, there are plenty of situations where the short-term pain of dilution can be made up in the long-run, as the cash raised from this dilution helps to enhance the underlying value of the company.
However, that’s thus far not been the case with LCID stock. Time and time again since going public, Lucid has tapped into its primary funding source: Saudi Arabia’s Public Investment Fund, or PIF.
Since the end of 2021, Lucid’s share count has increased from 1.65 billion to nearly 2.3 billion. PIF has been the lead buyer of these additional shares, most recently during a $3 billion funding round last May.
Yet despite raising all of this additional cash, Lucid’s results have worsened rather than improved. In recent quarters, sales/deliveries have declined, and high operating losses have persisted.
No End in Sight to these Major Issues
On Feb. 21, Lucid Group released its results for Q4 and the full year 2023. Once again, the numbers were lackluster. Yes, the earnings press release touted a 37% year-over-year increase in vehicle deliveries in 2023. However, it should be noted that overall revenue fell by around 2.1% in 2023 compared to 2022.
For the year, operating losses surged from $2.6 billion to $3.1 billion. Even worse, Lucid’s updates to outlook suggest more of the same during 2024. For the current year, management expects only a 6.8% increase in total vehicle production, from 8,428 to around 9,000 vehicles.
Although this production figure exceeds last year’s delivery figure (6,001 vehicle) by around 50%, don’t assume such a sales surge is just around the corner. As high interest rates and competition limit the appeal of Lucid’s vehicles relative to other luxury EV offerings, it is highly questionable that the company will experience much sales growth this year.
As sluggish growth persists, so too will high cash burn. Assuming the Saudi government remains committed to keeping Lucid afloat (as part of its efforts to become a major EV manufacturing hub), expect further capital raises.
Bottom Line on Lucid: Take Your Chances Elsewhere
With sales slumping, and the chances of Lucid ever becoming a major EV brand dimming, the market is likely to continue de-rating its perceived value of the company.
The continued sale of additional shares to PIF will exacerbate the impact of this on LCID’s future performance. A decreasing market cap divided by an increasing share count means a substantially lower stock price.
Again, it may not happen in a matter of days, weeks, or even months, but over the next few years, another massive drop in price, from around $3.17 per share today to sub-$1 per share prices, may be inevitable.
As the long-term forecast remains very dreadful, even if you are more bullish-than-average on the prospects of early-stage EV stocks, take your chances elsewhere. Avoid LCID stock completely.
LCID stock earns an F rating in Portfolio Grader.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.