Should You Buy Lucid Group Stock While It's Below $70?

Key Points

• Lucid Group boasts impressive technology and deep-pocketed partners.

• However, the lack of affordable models will continue to hamper growth.

• 10 stocks we like better than Lucid Group ›

It has been a rollercoaster year for Lucid Group (NASDAQ: LCID), with shares of the electric vehicle (EV) maker gyrating between $16 and $35. But one Wall Street analyst remains unfazed. He has a price target of $70 for Lucid stock. If you're tracking electric car stocks, you'll want to understand his thinking.

3 Reasons this Wall Street analyst loves Lucid Group stock

Mickey Legg is an analyst at Benchmark Company who has covered the EV space for several years. One of his top picks right now is Lucid Group. His $70 price target implies nearly 200% in potential upside. There are three factors right now that get him excited.

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First, he believes electric vehicle sales in the U.S. will accelerate in 2025 and 2026. There are a few problems with this prediction. EV sales growth decelerated heavily from 2023 to 2024. In 2023, 1.2 million EVs were sold nationwide, a 46% increase versus the year before. But last year, just 1.3 million EVs were sold, a growth rate of only 7%. Additionally, the elimination of EV tax credits may hamper demand in the back half of 2025 through 2026 and beyond. Predicting an acceleration in EV sales, therefore, is a very bullish take.

But Legg's thesis rests on more than just higher industrywide sales. He notes Lucid's "advanced technology" as well as its "highly integrated manufacturing capabilities." For years, Lucid has been pushing back against its positioning as a car manufacturer, instead pitching its capabilities as a technology provider. "I'd love it to be 20-80. Twenty percent doing cars, 80% licensing," Lucid's former CEO said earlier this year.

Lucid's deal with Uber Technologies to supply it with 20,000 vehicles that will power its robotaxi division lends credence to this vision. Uber required high-tech vehicles to enable autonomous driving, and out of all the global manufacturers, it chose Lucid, investing $300 million directly into the company as well. So, while I don't agree with Legg's bullishness on EV sales, there is something to say about Lucid's differentiated technology moving forward.

Another factor that Legg is excited about is Saudi Arabia's huge stake in Lucid. The country's sovereign wealth fund has repeatedly provided financing to keep Lucid afloat. The country also intends to take delivery of 100,000 Lucid vehicles from 2022 to 2032. This is a double-edged sword, however. As a majority investor, Saudi Arabia's influence on Lucid is huge, and the country's goals may not always align with what investors wish to see.

So, while the country has been a valuable partner thus far, there is structural risk in investing alongside an influential entity that may not have your priorities in mind.

Image source: Getty Images.

Don't invest in Lucid Group before understanding this challenge

There is one final challenge Lucid Group faces that every investor should understand. And that is a lack of clarity when it comes to the introduction of affordable electric models.

Nearly 70% of U.S. buyers are looking to spend less than $50,000 on their next vehicle purchase. With zero models priced under $50,000, Lucid is missing out on tens of millions of potential buyers. The company believes it can get an affordable model to market by the end of 2026, but numerous questions remain about its ability to finance and scale the required infrastructure to do so. Competitors like Rivian Automotive and Tesla, meanwhile, will both have several affordable models on the market by the end of next year.

This is the challenge with Lucid right now. Even if EV sales accelerate like Legg predicts, the company simply doesn't have the right models to take advantage of such growth. While its technology is exciting, it won't see mass adoption until costs come down. So while some analysts remain bullish on Lucid stock, I'm remaining on the sidelines for now.

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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.