EV maker Lucid's stock has dropped 32% this year. Should you buy the dip?
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Lucid Group (NASDAQ:LCID) stock has slid over 30% since the beginning of the year, despite its flagship vehicle being voted MotorTrendâs Car of the Year. Does the dip make the stock a buy?
The Next Tesla?
Luxury EV maker Lucid (LCID) has been touted as the next Tesla (NASDAQ:TSLA), a reputation stoked by the fact that CEO Peter Rawlinson and Chief Engineer Eric Bach came from Elon Musk's EV pioneer. The similarities carry over to the company's ambitions. For example, in addition to sleek electric cars, the company has also been developing an energy storage business.
Lucid went public in July through a merger with SPAC Churchill Capital Corp. IV, in deal that carried an equity value of $11.75B. Its largest investor is the Saudi Arabian sovereign wealth fund PIF, which holds a 62% stake, according to a recent filing.
While shares of several EV makers have fallen significantly over the past 30 days, Lucidâs have been particularly hard hit, tumbling 32%. In comparison, Rivian (NASDAQ:RIVN) shares have declined 17%, Fisker (NYSE:FSR) shares have retreated 15%, and Tesla (TSLA) shares have slid 12%.
Much of Lucidâs allure can be attributed to the buzz surrounding its first luxury sedan, the Lucid Air, which MotorTrend chose as its 2022 Car of the Year. The award was based on its design, engineering, performance and unusually long drive range of 520 miles. The company began delivering the vehicle in late October. The Lucid Airâs base model lists for $77,400.
Is LCID a Buy?
Wall Street analysts have a Hold rating on the stock, on average. Of the five analysts tracked by SA over the past 90 days, two had a Strong Buy rating, two a Hold and one rated it a Strong Sell.
SAâs Quant rating on Lucid is also a Hold. The company received a B for momentum and a C+ for growth, but Fs for profitability and valuation. SA authors, on the other hand, have an average rating of buy.
On Dec. 29, Citibank resumed coverage of Lucid with a Buy rating and price target of $57, citing its âbest-in-class blend of range, performance, charging dynamics and price,â along with its position as an early entrant in the luxury EV market and its advanced sensor system. The bank cautioned, however, that it regarded the stock as high risk as Lucid was only ramping up its first sales and needed to scale production successfully.
Also in late December, Guggenheim initiated coverage with a Neutral rating and price target of $38, due to Lucidâs âbest-in-classâ EV technology, vertical integration, the revenue potential of its powertrain supply business, and following Teslaâs example of launching âa high price/low volume product to establish brand DNA first.â
âOverall, due to strong EV fundamentals and our positive view of the product/technology and management team, we are giving LCID a premium multiple,â wrote Guggenheim in its note, âbut when blended with our long-term DCF valuation, we shake out to a fair value of approximately $38 per share, which supports our neutral rating.â
For a more bearish view on Lucid, check out SA contributor Star Investmentsâ âLucid: Following in the Wake of Tesla.â For a bullish take, read Investor Tripâs âLucid: Buy This EV Stock Ahead of Upcoming Earnings.â