Electric Vehicle (EV) player Lucid Group (LCID) is grabbing the spotlight lately for various reasons. After going public in July upon merging with acquisition company Churchill Capital, the upstart automaker hasn’t released any cars yet, but has made dreamy promises about producing environmentally-friendly luxury vehicles without compromising on performance and technology.
Notably, the company claims that the preliminary versions of its cars so far demonstrate what was promised. There are many aspects to the company that keep me bullish on its prospects, and I have tried to put them together in this article. (See Lucid stock chart on TipRanks)
Financial Strength and Encouraging Pipeline
One of the most important positives for the company is that it is free of any long-term debt or any other liabilities, which will not only smooth the process of maintaining a net-cash position but will also help the company pursue growth-driving initiatives like acquisitions and technology innovations.
Also, recently, Lucid announced cashless redemption of all of its outstanding public warrants, which will mitigate shareholder dilution, as assured by the company. Such action not only reflects a strong balance sheet but also helps increase investor confidence in the company, in turn boosting the share value of the company’s stock.
Moreover, a strong pipeline of EVs is another shining star on the list of Lucid’s credentials. Its first car, the Lucid Air, is set to hit the market by the end of this year, and is already enjoying significant clout in the EV consumer market. Moreover, the company will start production of its first SUV, Project Gravity, in 2023.
Lucid Air: a Tailwind
Come September 27, Lucid will invite select guests to its manufacturing unit at Casa Grande, Arizona, to take a tour of the manufacturing processes and test drive the Lucid Air. Reportedly, the car will have a driving range of about 500 miles, which is notably higher than Tesla’s (TSLA) Model S Long range of 412 miles.
This move also demonstrates that the company is keeping its word about starting to bring its cars to the market this year.
Additionally, the launch of Lucid Air is a result of a decade of research and design testing leveraging compelling technology and batteries which also have been extensively tested to deliver optimal performance.
Again, the Dream Edition of the Lucid Air has already been sold out to pre-bookings. This reflects the strong customer interest it has garnered even before it has released its cars in the market.
If the week-long demonstration program is successful, you might not find the Lucid stocks so cheap by the end of the month.
Why Hasn’t the Stock Performed Well, So Far?
The EV market has recently undergone a correction, reflecting investor’s dilemma regarding dwindling EV production thanks to semiconductor shortages. This has affected EV players throughout the industry as a whole, affecting their stock prices.
Moreover, in August, a lockup period for institutional investors expired, allowing them to sell their stake in Lucid, which added to the stock’s woes.
Again, many investors are not clear about the impacts of the cashless redemption of public warrants recently announced by the company, despite the company backing their decision with an explanation. Thus, the announcement has not been able to create any impact on the stock value and has even led to some level of confusion sell-offs.
Do the Positives Outweigh the Negatives?
However, the positives seem to win on a micro, as well as macro level. Several big tech heavyweights are aiming to reach carbon neutrality, which is expected to drive demand for EVs once the supply issues ease. According to Facts and Factors, citing a Globenewswire article, the global EV market is expected to reach $700 billion by 2026, witnessing a CAGR of 22% between 2021 and 2026.
Drawbacks also did not deter Citigroup analyst Itay Michaeli from initiating coverage on Lucid with a Buy rating and a $28 price target, earlier this month. Based on his Buy rating, the consensus rating for the stock is a Moderate Buy. The average Lucid price target of $28 indicates 38.6% upside potential from the current level.
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a tool that unites all of TipRanks’ equity insights.
Disclosure: At the time of publication, Chandrima Sanyal did not have a position in any of the securities mentioned in this article.
Disclaimer: The information contained in this article represents the views and opinion of the writer only, and not the views or opinion of TipRanks or its affiliates, and should be considered for informational purposes only. TipRanks makes no warranties about the completeness, accuracy or reliability of such information. Nothing in this article should be taken as a recommendation or solicitation to purchase or sell securities. Nothing in the article constitutes legal, professional, investment and/or financial advice and/or takes into account the specific needs and/or requirements of an individual, nor does any information in the article constitute a comprehensive or complete statement of the matters or subject discussed therein. TipRanks and its affiliates disclaim all liability or responsibility with respect to the content of the article, and any action taken upon the information in the article is at your own and sole risk. The link to this article does not constitute an endorsement or recommendation by TipRanks or its affiliates. Past performance is not indicative of future results, prices or performance.
