Lucid Group Stock Plummets 33% Since July -- 1 Problem Is to Blame.

Key Points

• Lucid is now exposed to the global robotaxi market.

• It is reasonable to question how much the company will actually benefit.

• 10 stocks we like better than Lucid Group ›

In July, Lucid Group (NASDAQ: LCID) stock soared from $20 per share to more than $30 per share. Since those highs, however, shares have slowly sunk in value. Today, shares trade below $20 per share.

Why is Lucid stock falling? There's one obvious reason.

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Lucid stock popped after its $300 million deal with Uber

On July 17, Lucid Group announced a blockbuster deal with Uber Technologies. The deal called for Uber to invest $300 million into Lucid. In return, Lucid would supply Uber with 20,000 SUVs that would power Uber's fledgling robotaxi division.

At first, the market was exuberant about the news. Tesla had recently launched its robotaxi service in Austin, Texas, with some analysts believing the service could add $1 trillion to Tesla's market cap by the end of 2026. Others have noted that the global robotaxi market could eventually be worth as much as $10 trillion. Armed with a major partner with a global scale, Lucid's deal with Uber suggested that the company would be a major player in this emerging opportunity. The $300 million cash infusion, meanwhile, was a meaningful addition for an unprofitable company struggling to achieve economies of scale.

Lucid's deal with Uber presented a possible game-changer for the company's long-term prospects. Why, then, did shares cede all of the gains over the following weeks? Perhaps investors had time to digest the true details of the partnership, learning in the process that there are several reasons for concern.

Image source: Getty Images.

Lucid's deal with Uber isn't as promising as it sounds

Let's look at the financial implications first. On Sept. 4, Lucid announced the closing of Uber's $300 million investment. "The strategic investment was made as part of the next-generation premium global robotaxi program announced in July," the company noted. "The robotaxi, which will utilize Lucid's electric vehicle technology platform, is planned to be built at Lucid's manufacturing facility in Arizona and will operate exclusively on Uber's ride-hailing platform. The funding supports the partnership between the two companies and contributes to development costs associated with the autonomous robotaxi initiative."

Here's the problem: Last quarter, Lucid posted a net loss of $539 million. Over the past five years, Lucid has never posted a positive quarterly profit. That's a reasonable situation to be in for a growth company trying to achieve critical scale. But it also puts Uber's $300 million investment into context. That is, Uber's investment won't even cover what Lucid typically loses in a single quarter.

The second area of concern is the timing of the robotaxi business. The deal calls for Lucid to supply 20,000 vehicles to Uber over the next six years. The robotaxi service, meanwhile, isn't supposed to begin until "late next year." Put simply, this is not a near-term opportunity for Lucid. Given the company's ongoing net losses, that's a problem. For years, the company has been selling more and more stock to cover its losses, diluting shareholders in the process. The deal's long-term nature does provide upside opportunity. But as the market has shown in recent months, it's reasonable to be skeptical of the timeline. Technology could change in the coming years, prompting Uber to add competing partners. Plus, there's no guarantee that Lucid will maintain the capital power necessary to deliver on its end of the deal.

The final concern is that Lucid itself won't be operating the robotaxi division. That will be wholly owned by Uber. So, while Lucid does have direct exposure to the market, it will act as a supplier, not a primary beneficiary.

In all, Lucid's deal with Uber is undoubtedly exciting, with the potential to change the company's long-term trajectory. But there are many reasons for caution, a reality that forced shares to give up the short-term gains that were realized after the initial announcement.

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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.