Why I'm Watching Lucid Group Stock Closely Even If Experts Think It's Overvalued

Some Wall Street analysts think that Lucid Group (NASDAQ: LCID) stock is a strong buy. Adam Jonas, an analyst at Morgan Stanley, thinks shares could nearly double next year. Others aren't so sure. In fact, three analysts currently have a "sell" rating on Lucid shares.

Wall Street may not be able to make up its mind about Lucid, but I'm keeping a very close eye on the company. If you're invested in other electric vehicle (EV) stocks like Tesla or Rivian Automotive, you'll also want to keep an eye on Lucid for one key reason.

Lucid Group no longer wants to be an EV manufacturer

Earlier this year, former Lucid CEO Peter Rawlinson revealed his long-term vision for the company. Surprisingly, only a small part of his vision involved manufacturing vehicles. Mostly, he wanted Lucid to become a tech supplier, licensing its proprietary technology to other automakers. "I'd love it to be 20-80," Rawlinson said. "Twenty percent doing cars, 80% licensing."

On paper, technology licensing could be much more lucrative than making physical vehicles. This business model likely comes with higher gross profit margins, lower capital expenditures, and a greater total addressable market, since Lucid could theoretically sell to every car maker on the planet. Why, then, did Lucid get involved in the car making business? "People think, 'Oh, why didn't you just be a supplier, Peter?'," Rawlinson explains. "Because we need the cars as a shop window for our product."

In a way, this business model transformation is fairly similar to what Tesla is attempting to pull off right now. Tesla shares trade at a huge premium to other EV stocks like Rivian and Lucid. There are many reasons for this premium, but one is that many investors no longer value Tesla as a car manufacturing company. Instead, they see it as a technology or AI business, whose future profits will come from next-gen services like robotaxis. Rivian has also ramped up its AI and tech investments in recent years, though for now, its exact ambitions remain unclear.

Lucid isn't starting from zero in its journey to become a tech supplier to other businesses. This summer, it closed a sizable partnership with Uber Technologies. Uber directly invested $300 million into Lucid. In return, Lucid will supply Uber with 20,000 vehicles that will help power that company's fledgling robotaxi service.

The deal with Uber generated important social validation for Lucid. Clearly, other multi-billion-dollar businesses believe in its technology, and are willing to put their money where their mouth is. But is it time to buy Lucid stock based on this premise? The answer may surprise you.

Image source: The Motley Fool.

Is Lucid Group stock a buy?

From a car-making perspective, there's not a lot to get excited about for Lucid. Right now, it only has two luxury models in its lineup, both of which can cost upwards of $100,000 depending on options. This prices out the vast majority of the market. Nearly 70% of prospective car buyers, for instance, are looking to spend less than $50,000 on their next vehicle purchase.

The company did release its Gravity SUV earlier this year. But so far, sales have been muted, with production issues keeping a lid on deliveries. The company did hit record deliveries last quarter, but so did many other electric automakers, given the looming expiration of federal tax credits. Lucid has teased lower-priced models that are expected in the back half of 2026. Details, however, have been scarce. In an industry rife with production delays, I'm skeptical that these models will be launched any earlier than 2027.

This leaves Lucid in a tough place. Shares do trade at a discount to Tesla, but at a sizable premium to Rivian. Yet to justify this valuation, the company will likely need to continue executing on its vision for becoming a tech supplier. Will there be additional deals similar to the one forged with Uber on the way? We can't be sure. But until I see more traction on this thesis, I'm sticking to the sidelines. Lucid is an exciting business -- but that's from the perspective of a fan, not an investor.

Ryan Vanzo has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla and Uber Technologies. The Motley Fool has a disclosure policy.