Where Will Lucid Stock Be in 1 Year?

Source The Motley Fool

With its shares down 52% since the start of the year, Lucid Group (NASDAQ: LCID) seems to be a falling knife. Even though shares look cheap right now, they could fall even more due to the company's deteriorating fundamentals. Let's explore what the next 12 months could have in store as the embattled electric-vehicle (EV) maker fights for survival.

The Trump effect?

Unlike EV-industry leader Tesla, which is up 28% since President-elect Donald Trump's victory, Lucid hasn't reacted positively to the news, with its stock down by roughly 10% since Nov. 5. It's impossible to pinpoint the exact cause of a stock-price move, but there are some reasons why investors may see the new administration as a threat.

Unlike the outgoing Biden administration, Trump seems less willing to force the adoption of electric vehicles through government intervention. Reuters reports that his transition team plans to end the $7,500 consumer tax credit for EV purchases -- a move that would take Lucid's already-expensive cars even further out of reach for most consumers.

More broadly, Trump pledged to end what he calls Biden's "EV mandates," which could refer to the recent tightening of Environmental Protection Agency (EPA) emission standards that help push a transition to EVs by making gasoline-powered cars more costly for automakers to produce.

The situation isn't as bad as it looks

While these developments may look like a death knell for Lucid's business, that isn't necessarily the case. The regulatory pressure may have actually hurt some EV industry participants by introducing too much competition in the face of limited organic demand.

Legacy automakers like Ford Motor Company, which lost $1.2 billion with its EV segment in the third quarter, are squeezing out smaller pure-play companies like Lucid, which aren't capitalized enough to sustain such losses. An easing of government pressure to transition to EVs could make the industry less competitive, giving smaller companies more room to establish their brands and bring their business models to maturity.

But even in the best-case scenario, Lucid faces an uphill battle. Third-quarter operational losses jumped 2.3% to $771 million. On an annualized basis, that comes out to over $3 billion, which is substantial for a company with only around $3.5 billion in liquidity on its balance sheet.

What could the next year have in store?

Over the next 12 months, Lucid's most pressing concern will probably be getting the cash it needs to stay in business. And to do this, management will likely rely on capital raises, which involve issuing and selling more units of stock.

While this avoids the future cash-flow challenges of debt financing, it reduces current investors' claims on future earnings. In Lucid's case, dilution has historically triggered sell-offs.

Electric powertrains arranged in rows

Image source: Getty Images.

The good news is that Lucid has a strong relationship with the government of Saudi Arabia, which owns around 60% of its shares through its public investment fund (PIF). The Saudi government has historically been a key participant in Lucid's prior stock sales.

Lucid's management also plans to drive growth through new model releases, such as its Gravity SUV, which is expected to begin production late this year. The new model will give Lucid exposure to the SUV market, which is the most popular vehicle type in North America. Overall, the company faces a very uncertain future but has everything it needs to stay in business and try to execute its long-term strategy.

Is Lucid stock a buy or a sell?

Lucid's stock is a hold in my book. While fear of the Trump administration may be overblown, the EV maker still faces a highly uncertain future because of its cash burn and need for constant equity dilution. Investors may want to wait until they see the sales performance of the new Gravity SUVs before they get a clearer picture of the company's prospects.

Should you invest $1,000 in Lucid Group right now?

Before you buy stock in Lucid Group, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Lucid Group wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $858,854!*

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.

See the 10 stocks »

*Stock Advisor returns as of November 18, 2024

Will Ebiefung has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.

Disclaimer: For information purposes only. Past performance is not indicative of future results.
placeholder
Bitcoin Outlook 2025As the Bitcoin market continues to mature, its 2025 outlook appears highly favourable, driven by institutional adoption and regulatory developments.
Author  TradingKey
Jan 23, Thu
As the Bitcoin market continues to mature, its 2025 outlook appears highly favourable, driven by institutional adoption and regulatory developments.
placeholder
What Crypto Whales are Buying For May 2025Crypto whales are making bold moves heading into May 2025, and three tokens are standing out: Ethereum (ETH), Artificial Superintelligence Alliance (FET), and Onyxcoin (XCN).
Author  Beincrypto
Apr 21, Mon
Crypto whales are making bold moves heading into May 2025, and three tokens are standing out: Ethereum (ETH), Artificial Superintelligence Alliance (FET), and Onyxcoin (XCN).
placeholder
Analysts Highlight 4 Reasons Why ETH Price Could Rebound Strongly in MayEthereum (ETH) has declined for five consecutive months. However, it enters May with rising optimism.
Author  Beincrypto
May 07, Wed
Ethereum (ETH) has declined for five consecutive months. However, it enters May with rising optimism.
placeholder
Ethereum Price Ready to Surge—$2,000 Level Could Be Within ReachEthereum price started a fresh increase above the $1,800 zone. ETH is now rising and attempting a move above the $1,850 resistance. Ethereum started a fresh recovery wave above the $1,820 resistance.
Author  NewsBTC
May 08, Thu
Ethereum price started a fresh increase above the $1,800 zone. ETH is now rising and attempting a move above the $1,850 resistance. Ethereum started a fresh recovery wave above the $1,820 resistance.
placeholder
Ethereum Price Explodes Past $2,200 with 25% Surge—Momentum Builds FastEthereum price started a fresh surge above the $2,000 zone. ETH is now up over 25% and consolidating gains near the $2,200 zone. Ethereum started a fresh surge above the $2,000 resistance.
Author  NewsBTC
May 09, Fri
Ethereum price started a fresh surge above the $2,000 zone. ETH is now up over 25% and consolidating gains near the $2,200 zone. Ethereum started a fresh surge above the $2,000 resistance.
goTop
quote