Amid a volatile macroeconomic scenario and soaring recessionary fears, the affordability of Electric Vehicles (EVs) has been somewhat affected. Against this backdrop, EV stock Lucid Group, Inc. (LCID), with mounting losses, could be avoided now. Let us delve deeper to find more.
LCID is a technology and automotive company that designs, engineers, and builds EVs, EV powertrains, and battery systems. The company’s production throughout 2022 was 7,180 vehicles. Of those vehicles, the company reportedly only delivered around 4,369 EVs. LCID set 2023 annual production targets of 10,000 to 14,000, which is roughly half of the 20,000 to 22,000 deliveries analysts had expected for the year.
LCID’s Chief Executive, Peter Rawlinson, explained that the early production struggles had prompted the company to cut production plans last year, which led some early reservation holders to cancel. Also, newly offered discounts by LCID for some vehicle configurations have further fed analyst worries about declining demand for the company’s vehicles.
Given its performance in the last quarter, investors seem to be bearish about the EV stock. The stock has plunged 67.7% over the past year and 47.4% over the past six months to close the last trading session at $8.19.
The stock could plunge further amid challenges such as stubbornly-high inflation, competition with others in the EV space, supply chain constraints, and production-related issues.
Here are the factors that could influence LCID’s performance in the upcoming months:
Disappointing Financials
LCID’s loss from operations widened 54.4% year-over-year to $749.74 million for the fiscal fourth quarter that ended December 31, 2022. Its total costs and expenses increased 96.7% year-over-year to $1.01 billion.
LCID’s non-GAAP adjusted EBITDA loss widened 108.2% year-over-year to negative $623.61 million. Its net loss attributable to common stockholders came in at $472.65 million for the same quarter.
Its net loss per share attributable to common stockholders came in at $0.28. Moreover, its cash and cash equivalents came in at $1.74 billion for the period that ended December 31, 2022, compared to $6.30 billion for the period that ended December 31, 2021.
Unfavorable Bottom Line Estimates
For the current quarter (ending March 2023), LCID’s EPS is expected to decline 6.1% to negative $0.39. Also, for the second quarter ending June 2023, its EPS is expected to decline 6.4% to negative $0.35. Street expects its revenue for the same quarter to come in at $306.70 million. It failed to surpass Street EPS estimates in each of the trailing four quarters.
Stretched Valuation
In terms of forward EV/sales, LCID is trading at 9.99x, 776.8% higher than the industry average of 1.14x. Its forward price/sales multiple of 11.15 is significantly higher than the 0.87 industry average. In terms of forward price/book, LCID is trading at 6.66x, 164.7% higher than the industry average of 2.52x.
Low Profitability
LCID’s trailing-12-month gross profit margin and net income of negative 170.66% and 214.49% compare to the 34.99% and 4.56% industry averages, respectively. Its trailing-12-month ROCE, ROTA, and ROTC of negative 31.59%, 16.56%, and 25.33% compares to the 11.05%, 3.84%, and 6.30% industry averages, respectively.
POWR Ratings Reflect Bleak Outlook
LCID’s POWR Ratings reflect this bleak outlook. The stock has an overall F rating, equating to a Strong Sell in our proprietary rating system. The POWR Ratings are calculated considering 118 distinct factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. It has an F for Value, in sync with its stretched valuation. The F grade for Quality is consistent with its lower-than-industry profitability.
Also, its D grade for Sentiment is in sync with its unfavorable bottom-line estimates.
Within the 58-stock Auto & Vehicle Manufacturers industry, it is ranked last.
To see the other ratings of LCID for Growth, Momentum, and Stability, click here.
View all the top stocks in the Auto & Vehicle Manufacturers industry here.
Bottom Line
LCID faces severe competition in the saturated EV industry. The stock appears to be on a downward trajectory and is currently trading below its 50-day and 200-day moving averages of $9.24 and $13.15, respectively. Given its substantial losses, low profitability, and high valuation, it could be wise to avoid this EV stock now.
How Does Lucid Group Inc. (LCID) Stack Up Against its Peers?
While LCID has an overall F rating, one might want to consider its industry peers, Stellantis N.V. (STLA), Honda Motor Co. Ltd. ADR (HMC), and Isuzu Motors Limited (ISUZY), which have an overall A (Strong Buy) rating.
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LCID shares were trading at $8.25 per share on Wednesday morning, up $0.06 (+0.73%). Year-to-date, LCID has gained 20.79%, versus a 4.89% rise in the benchmark S&P 500 index during the same period.
About the Author: Sristi Suman Jayaswal
The stock market dynamics sparked Sristi's interest during her school days, which led her to become a financial journalist. Investing in undervalued stocks with solid long-term growth prospects is her preferred strategy. Having earned a master's degree in Accounting and Finance, Sristi hopes to deepen her investment research experience and better guide investors.
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