Why Is Wall Street So Bullish on Lucid Group? Here's the $1 Trillion Reason

Key Points

• Robotaxis could prove to be a multi-trillion-dollar opportunity.

• Lucid Group's new deal with Uber should add significant value.

• 10 stocks we like better than Lucid Group ›

This week, Wall Street analyst Michael Legg upped his price target on Lucid Group (NASDAQ: LCID) to $7 per share. That signals more than 100% in potential upside over the next 12 months. What makes him and other analysts so bullish? The answer is a $1 trillion opportunity.

Robotaxis are a $1 trillion opportunity

When Tesla launched its robotaxi pilot program in Austin, Texas, last month, analysts were excited about the potential growth effects. Dan Ives, an analyst at Wedbush Securities, believes the robotaxi division could add $1 trillion to Tesla's valuation over the next 12 to 18 months. Cathie Wood, CEO of Ark Invest, believes that the global robotaxi market will eventually be worth around $10 trillion.

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This is what makes the latest news from Lucid so exciting. On July 17, the company revealed that it would be partnering with Uber Technologies (NYSE: UBER) to scale a robotaxi division. The deal calls for Uber to buy 20,000 Lucid Gravity SUVs over the next six years exclusively for this robotaxi service.

Uber will also invest $300 million into Lucid -- a critical cash infusion for a money-losing business. Notably, Lucid and Uber already have a shared connection: They're two of the biggest holdings in Saudi Arabia's PIF investment fund.

Image source: Getty Images.

While the Gravity SUVs will be the first model to be used in Uber's robotaxi service, the company revealed that it will "consider future vehicles" -- a nod to the potential of not only adopting Lucid's Air sedan vehicle, but also Lucid's future mass market vehicles, three of which are expected to begin production over the next few years.

Uber and Lucid's combined market capitalization is around $200 billion. That's far less than Tesla's current valuation of $1 trillion. So it's possible that Tesla can scale its robotaxi division faster than Uber. But if Uber can scale robotaxis quickly, Lucid will be a direct and major beneficiary.

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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.