Since final 12 months’s SPAC itemizing, Lucid Group (NASDAQ:LCID) inventory has turned out to be a high-beta inventory. The volatility within the inventory is no surprise with the markets in a value discovery interval for the enterprise. Additional, there was ample new move particular to the corporate that has elevated the volatility.
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LCID inventory has witnessed a comparatively swift correction from closing highs of $55 towards the top of November. At present, the inventory trades decrease by 53%.
There was a broad-based correction for electric vehicle stocks. Moreover that, fairness dilution and intense competitors are probably causes for LCID inventory trending decrease.
Within the present 12 months, there will probably be around 500 different EV models globally. This places into perspective the competitors that Lucid faces. Can optimistic trade tailwinds greater than offset the competitors headwinds?
I consider that Lucid will acquire market share within the coming years. One motive is the know-how differentiation issue. Nevertheless, that’s not the one catalyst.
For example, Lucid is the primary EV that’s licensed by the EPA with a single-charge vary of 520 miles. At first of the 12 months, Mercedes-Benz boasted of a latest EV concept with a 620-mile range. Contemplating the speed of funding in product improvement within the EV trade, there will probably be gamers that higher Mercedes within the coming quarters.
Clearly, know-how is a key issue, however not the one issue that may guarantee survival.
Components Help LCID Inventory Appreciation
With competitors, the elements that give Lucid an edge embody wider presence and product improvement. Presence in a number of geographies will guarantee a much bigger addressable market. Nevertheless, a superb group and a top quality product additionally wants monetary backing, which LCID inventory has.
Lucid Motors reported money in hand of $4.eight billion as of Q3 2021. In December 2021, Lucid raised $2.zero billion via exercise of convertible note green-shoe. Lucid is backed by Saudi Arabia’s Public Funding Fund (PIF). It subsequently appears unlikely that financing progress and product innovation will probably be a problem.
One other progress issue is the corporate’s imaginative and prescient. The primary mannequin, Lucid Air, is focused towards premium markets. Even with concentrate on a number of geographies, the addressable market is prone to be restricted. In 2022, a cheaper model of the luxurious sedan will probably be launched. The SUV, Project Gravity is planned for 2023. It’s additionally prone to have a comparatively decrease pricing.
Nevertheless, the game-changer will probably be plans for a $25,000 electrical automobile. Final 12 months, the corporate’s CEO talked about that “six well-known automakers have reached out to him over the past month and expressed curiosity in Lucid Motors’ know-how.” The plan is to launch a automotive for the mass market via a partnership.
The important thing level is {that a} mass market automotive will considerably improve the corporate’s market share progress potential. For example, India’s EV penetration is lower than 1%. Greater EV value and poor charging infrastructure are headwinds for progress.
Nevertheless, between 2021 and 2030, the Indian EV market is anticipated to grow at a CAGR of 90%. With a mass market automotive, Lucid can faucet this potential.
Concluding Views
It’s value noting that there are alternatives to unfold wings with progress in market share and monetary flexibility.
Tesla (NASDAQ:TSLA), for instance, may even enter the business EV section with Semi. Equally, XPeng (NYSE:XPEV) is planning flying cars by 2024 or 2025, which might additionally function on roads. As know-how continues to develop, there will probably be continued progress alternatives.
For now, Lucid has seen a wholesome response for its preliminary mannequin. The corporate has additionally opened on-line reserving in a number of international locations, which is able to enhance the order e book for 2022.
From a monetary perspective, free money flows will stay damaging within the coming years. Nevertheless, the markets are prone to worth Lucid on the premise of market share progress and product improvement. I’m optimistic on that entrance.
The EV maker is about to report earnings on Feb. 28. Zacks shows a consensus estimate of a 26-cent loss; Capital IQ has two analysts with a imply estimate of a 30-cent loss. The corporate’s third quarter report in mid November was 19 cents in need of Road expections.
LCID inventory subsequently appears engaging after a significant correction from November 2021 highs. I’d wager on one other sturdy rally within the coming quarters.
On the date of publication, Faisal Humayun didn’t maintain (both straight or not directly) any positions in any of the securities talked about on this article. The opinions expressed on this article are these of the author, topic to the InvestorPlace.com Publishing Guidelines.
Faisal Humayun is a senior analysis analyst with 12 years of trade expertise within the subject of credit score analysis, fairness analysis and monetary modelling. Faisal has authored over 1,500 inventory particular articles with concentrate on the know-how, power and commodities sector.
