Penny stock (learn more about penny stocks here) Lucid (NASDAQ:LCID) closed over 5.4% higher on Monday, March 25, after the company announced it secured $1 billion in investment. Investors cheered the development as the influx of capital will provide ample cash to fund its operations amid weak demand for EVs (electric vehicles).
The luxury EV maker entered into an agreement with its majority stockholder, Ayar Third Investment Company. Ayar is an affiliate of Public Investment Fund (PIF), Saudi Arabia’s sovereign wealth fund. Under this arrangement, Ayar has committed to acquiring $1 billion worth of LCID’s convertible preferred stock through a private placement. The company intends to utilize the funds for various corporate needs, which will help streamline costs and support the launch of its Gravity SUV later this year.
Stifel Nicolaus analyst Stephen Gengaro sees Ayar’s investment as positive for Lucid as it will provide the necessary capital to LCID to fund operations into 2025. The analyst predicts that upon conversion, the PIF’s ownership in Lucid would rise to approximately 64.1%. Gengaro reiterated a Hold rating on LCID stock on March 25. Similarly, Morgan Stanley analyst Adam Jonas also sees the investment as a positive development. However, Jonas remains bearish on LCID stock.
Is Lucid a Buy, Sell, or Hold?
Lucid stock has dropped over 64% in one year. Lower EV demand due to the higher interest rates, heightened competition, and continued cash burn remained a drag. Despite this notable drop in value, Wall Street maintains a bearish outlook on this penny stock.
Lucid stock has six Hold and three Sell recommendations for a Moderate Sell consensus rating. Analysts’ average price target on LCID stock is $3.56, implying a 21.92% upside potential from current levels.
Bottom Line
The capital infusion will likely allow Lucid to focus on growth initiatives. However, weak EV demand and competitive headwinds pose challenges for the company, reflected in analysts’ bearish outlook. While LCID stock sports a Moderate Sell consensus rating, investors can leverage TipRanks’ penny stock screener to find top-rated penny stocks.
