Could Lucid Motors Stock Turn $10,000 into $1 Million?

If you put $10,000 into Lucid Motors (NASDAQ: LCID) stock at its peak in February 2021, you would have just $120 today -- a decline of 99%. This horrifying crash highlights the risks involved in betting on speculative and unprofitable disruptors. That said, Lucid may be down, but it isn't out. And the lower price tag gives investors an opportunity to bet on a rebound.

Let's dig deeper to decide if new model releases, an exciting robotaxi partnership with Uber Technologies, and continued support from the Saudi Arabian government can help Lucid bounce back and start creating sustainable shareholder value over the next few years.

Lucid is still a mixed bag

Lucid's first-quarter earnings highlight its complicated operational situation. The good news is that production volume jumped 149% year over year to 5,500 vehicles. And this trend was driven by the ramping up of capacity at its Arizona manufacturing plant and the rollout of the new Gravity SUV, which has significantly expanded its addressable market.

Improving volumes is one of the main goals for a growth-oriented company because it allows for economies of scale advantages as fixed costs are spread over a larger number of units. This can improve margins and help a company like Lucid to turn the corner into profitability or offer lower prices to consumers to further increase its market share.

But while the production trend is encouraging, building a huge number of vehicles doesn't necessarily mean Lucid will be able to sell them.

First-quarter deliveries lagged, leading revenue to only grow by a relatively modest 20% to $282.5 million -- far short of the $440.4 million Wall Street analysts expected. Furthermore, inventories are building up as the company produces more vehicles than it can sell. And while Lucid hasn't provided much color on what it plans to do to fix the situation, CEO Silvio Napoli plans to conduct a review of the company's operations, which will be shared during its second-quarter earnings call.

Losses remain alarming

First-quarter earnings could have been a massive breakthrough for Lucid. The Gravity SUV looked poised to supercharge its flagging business and potentially create a pathway to profitability -- or at least an end to the eyewatering cash burn. Instead, investors have gotten more of the same.

Operating losses increased 37% year over year to $1.27 billion, which is extremely high for a company with a market cap of just $2.06 billion. And remember, that's for just one quarter. If current trends continue, full-year operating losses could easily exceed $5 billion. And this raises questions about the scale of equity dilution (issuing and selling more stock) that will be needed to raise the capital needed to keep the company afloat.

Image source: Getty Images.

Lucid is an extremely risky stock -- but there is still hope

Investors who buy Lucid now should remember that they are betting on an extremely distressed company with a high risk of failure. That said, there is still a possibility that it manages to turn things around over the long term and generate potential millionaire-maker returns.

Right now, the biggest glimmer of hope looks like the recent partnership with Uber Technologies, which plans to use Lucid's Gravity SUV as a platform for its self-driving robotaxis. The deal has involved $500 million in direct investment so far. And it is expected to involve the purchase of up to 35,000 vehicles, which could help soak up Lucid's excess production capacity, although this will be spread out over several years.

Lucid also enjoys significant support from the government of Saudi Arabia, which owns 60% of its equity through its public investment fund. The Saudis see Lucid as a part of their goal to diversify their economy away from fossil fuels. And they may be willing to financially support the company, even if it doesn't have a clear near-term payoff. That said, for regular investors, the stock looks like a hold until more information becomes available.

Will Ebiefung has positions in Lucid Group. The Motley Fool has positions in and recommends Uber Technologies. The Motley Fool has a disclosure policy.