Lucid Group is estimated to save $100M a year through jobs cuts
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Investors and analysts reacted on Wednesday to the decision by Lucid Group (NASDAQ:LCID) to reduce its headcount by over 1,300 workers by the end of the second quarter as part of a restructuring effort. The company estimates that it will incur a total of approximately $24M to $30M in charges in connection with the plan, which consist primarily of charges related to employee transition, severance payments, employee benefits, and stock-based compensation.
Morgan Stanley analyst Adam Jonas and team estimate the actions can save the electric vehicle maker in the order of more than $100M of expenses on an annualized basis, which implies a payback period of just about one month. Prior to the actions, the forecast was that Lucid would burn $3.5B of free cash in FY23, of which $1.8B is cash burn from operations.
The view from Morgan Stanley is that while the savings from the actions by themselves may only have a modest impact on cash consumption, savings could be meaningful when also combined with further actions including reduced capital expenditure and other actions. Other EV startups are anticipated to follow down Lucid's path.
Morgan Stanley reiterated an Underweight rating on LCID and price target of $5, but believes the company has an attractive suite of technologies and can be a relevant player in the fast growing EV business with the correct cost controls.
Shares of Lucid Group (LCID) were up 1.72% in premarket action on Wednesday to $7.68.
See all the valuation metric on Lucid.