Is It Too Late to Buy Lucid Stock? A Contrarian View Amidst Lucid's Recent Performance

Is It Too Late to Buy Lucid Stock?

The fledgling electric vehicle maker is running out of juice. Lucid, a fledgling maker of luxury electric vehicles, went public by merging with a special purpose acquisition company (SPAC) in July 2021. At the time, it attracted a lot of attention for three reasons: It was led by Tesla's former chief vehicle engineer Peter Rawlinson, it planned to produce even pricier EVs than Tesla, and it was on track to ship its first vehicles by the end of the year.

Why did the bulls give up on Lucid?

Lucid sells several versions of its Air sedan, and it plans to roll out its second vehicle, the Gravity SUV, by the end of 2024. Unfortunately, Lucid only produced 7,180 vehicles in 2022 and 8,428 vehicles in 2023 as it grappled with supply chain constraints and a weakening EV market.

For 2023, Lucid's total deliveries rose 37% to 6,001 vehicles, but its total revenue still dipped 2% to $595 million as it repeatedly reduced its average selling prices. Meanwhile, its operating loss widened from $2.95 billion to $3.10 billion.

What's the contrarian view for Lucid?

It's easy to see why Lucid's stock is trading so far below its all-time high, but it won't go bankrupt anytime soon. It ended 2023 with $4.78 billion in total liquidity, which it insists can last through "at least" 2025 as it ramps up its production of its Gravity SUV. Its manageable debt-to-equity ratio of 0.8 also gives it some room to raise fresh cash.

Lucid could struggle to scale up its business over the next few years, but analysts still expect it to generate $4.39 billion in revenue in 2026. That would represent a compound annual growth rate (CAGR) of 95% from 2023.

Lucid's downside potential might be limited at these prices, but its track record of overpromising and underdelivering, its ongoing price cuts, and its staggering losses are all preventing me from touching its stock.