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Lucid’s Q2 Sales Miss, Productions Cuts for 2022 Upset Investors

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Lucid made headlines on Wednesday after it failed to meet sales consensus estimates for the second quarter of 2022 and lowered its production volume for 2022 by 50%.

Lucid Group, Inc. (NASDAQ: LCID) has disappointed its investors with a (33.1%) sales surprise in the second quarter and lower production guidance for 2022.

Following the release of second-quarter results, shares of this $34.3-billion American electric vehicle (EV) company declined 11.6% in Wednesday’s extended trade. Founded in 2007, the company is headquartered in California and manufactures Lucid Air, an electric car.

What Do Q2 Numbers Tell Us about Lucid?

Lucid’s second-quarter performance clearly shows that the market size for this EV-maker has increased considerably over the past few quarters. Lucid Air customer deliveries stood at 679 in the second quarter, up from 360 in the first quarter of 2022 and 125 in 2021. Also, vehicle production totaled 1,405 in the first half of 2022.

Revenues stood at $97.3 million in the second quarter, up from $174 thousand in the year-ago quarter. However, the company failed to meet analysts’ revenue expectations of $145.5 million for the quarter.

The cost and expenses increased 163.6% year-over-year in the second quarter. This included the impact of a surge in costs of revenues, supply-chain issues, and logistic problems. Healthy top-line results were more than offset by high costs and expenses, resulting in a loss of $559.2 million from operations in the quarter.

Net loss was $0.33 per share in the second quarter versus the consensus estimate of $0.39 loss per share. The company had posted a loss of $7.21 per share in the year-ago quarter.

In addition to the financial numbers, Lucid’s liquidity position appears healthy. It had cash and cash equivalents of $3,157.4 million at the end of the second quarter. Its cash balance included the impact of a net cash outflow of $513.6 million for operating activities, $309.8 million spent on capital expenditure, and $1,419.2 million used for purchasing investments.

The company’s balance sheet is also highly leveraged, with long-term debt of $1,989.2 million at the end of the second quarter. Debt includes the impact of $6.7 million of proceeds from borrowings received in the quarter. High debts increased interest expenses from $30,000 in the year-ago quarter to $7.2 million in the second quarter of 2022.

Vehicle Demand Is Solid, but Production Remains an Issue for Lucid

As of August 3, 2022, Lucid has reservations for more than 37,000 vehicles, which it expects would translate to $3.5 billion in revenues. This projection is way higher than reservations for at least 30,000 vehicles and potential revenues of $2.9 billion estimated on May 5, 2022.

Despite the high demand for its vehicle, the company’s production capacity seems to be in the doldrums. It has lowered its vehicle production volume to the 6,000-7,000 range for 2022 from the previously anticipated range of 12,000-14,000 vehicles.

The Chief Executive Officer of Lucid Motors, Peter Rawlinson, said, “Our revised production guidance reflects the extraordinary supply chain and logistics challenges we encountered.”

Rawlinson added, “We’ve identified the primary bottlenecks, and we are taking appropriate measures – bringing our logistics operations in-house, adding key hires to the executive team, and restructuring our logistics and manufacturing organization.”

According to TipRanks’ Risk Analysis tool, Lucid is exposed to 24 risks related to the Production category, including manufacturing, costs, supply chain, and personnel. Notably, the tool has identified 88 risks in total for the stock.

For Now, Investors Should Wait & Watch

With an increase in the scale of production and effective management of near-term headwinds, Lucid would be to able leverage the high demand for its electric vehicles. Also, healthy liquidity would continue to support its investment plans in the years ahead.

As of now, a wait-and-watch approach could be a wise idea for investors either holding or willing to gain exposure to LCID stock.

CFRA’s analyst Garrett Nelson feels the same for LCID. Yesterday, Nelson reiterated a Hold rating on the stock while lowering its price target to $18 (12.45% downside risk) from $20.

On TipRanks, too, the stock has a Hold consensus rating based on one Buy, one Hold, and one Sell. LCID’s average price target is $22, which reflects upside potential of just 7% from current levels.

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