Great News for Lucid Investors: Is Now the Time to Buy Lucid Stock?

authorMichael Johnson2024-08-12
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lucid stock
Illustration by Intellectia.AI

Lucid Group (LCID), like many electric vehicle (EV) startups, has faced significant challenges as initial excitement in the EV market waned. However, recent positive developments suggest that the company might be on the path to recovery.

The Challenges Faced by Lucid Group

Lucid Group, an EV manufacturer, has been navigating a rough road filled with financial strains, production challenges, and doubts surrounding investor commitments, particularly from Saudi Arabia's Public Investment Fund (PIF). The company has been burning through cash while ramping up production, which raised concerns about its long-term viability.

Signs of Progress and Growth

Despite these challenges, Lucid has recently delivered encouraging news to its investors. The company has reported two consecutive quarters of strong performance, highlighted by a record-breaking second quarter in 2024. Lucid delivered 2,394 vehicles in Q2, marking a 70.5% increase compared to the previous year’s Q2 and surpassing analyst expectations.

This impressive delivery growth boosted Lucid's revenue to $200.6 million, beating the analysts’ forecast of $192.1 million. The company has also reaffirmed its goal of delivering 9,000 vehicles by the end of the year, a target that indicates a successful production ramp-up as it had delivered only 3,838 vehicles in the first half of 2024.

Adding to the positive momentum, Lucid has started preproduction of its highly anticipated Gravity SUV. This signals that the company is addressing initial production challenges and is on track to begin commercial production, with the goal of bringing the Gravity SUV to market by the end of 2024.

 

 

Strategic Financial Adjustments

Lucid’s management is also making strategic financial decisions to ensure the company's sustainability. The company has reduced its capital expenditure forecast for 2024 by $200 million, down from the initial full-year estimate of $1.5 billion. This move reflects a more cautious and efficient approach to managing resources.

Saudi Arabia's Continued Commitment

Perhaps the most significant news for Lucid investors is the renewed commitment from its largest shareholder, Saudi Arabia's Public Investment Fund (PIF). The PIF has pledged up to $1.5 billion in new funding to support the production ramp-up of the Gravity SUV in the U.S. and the development of Lucid’s plant in Saudi Arabia, where the government has committed to purchasing 100,000 vehicles over time.

Ayar Third Investment, a PIF affiliate, has agreed to buy $750 million worth of convertible preferred stock and provide up to $750 million in a credit line. This is the second substantial investment from the PIF in 2024, signaling continued confidence in Lucid’s future.

The PIF’s commitment is crucial as there were concerns among analysts that Saudi Arabia might pull back its support due to Lucid’s slower-than-expected progress. According to Andres Sheppard, a senior equity analyst at Cantor Fitzgerald, this $1.5 billion investment "helps to solidify the relationship between PIF and Lucid further." The PIF’s investment in Lucid has now grown to approximately $8 billion, representing a 60% ownership stake in the company.

What This Means for Lucid's Future

For investors, the latest infusion of cash provides Lucid with a financial runway through the fourth quarter of 2025. This timeline almost bridges the gap until Lucid's planned high-volume, mid-size SUV hits the market in 2026, with an anticipated price point of around $48,000.

After enduring a challenging period, Lucid Group is finally delivering positive news. With new investment from the PIF, the launch of production on the Gravity SUV, plans for a high-volume 2026 SUV, and increasing deliveries, Lucid appears to be on the path to long-term growth and success in the EV market.

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