Lucid: Brace For Turmoil

David Becker

Lucid Group, Inc. (NASDAQ:LCID) delivered a disappointing report for its caller FQ4'22 net release, posting gross and adjusted EBITDA beneath nan statement estimates.

However, nan stunner came from its outlook for FY23, arsenic CEO Peter Rawlinson and his squad proffered a accumulation outlook of conscionable 12K vehicles astatine nan midpoint of its guidance range.

Notably, it was good beneath nan Street's 21K estimate, suggesting that Lucid's accumulation ramp has suffered a important setback. With analysts expecting Lucid to assistance its gross to $2.44B antecedently successful 2023, investors request to expect a important cut, fixed its tepid outlook.

Therefore, it could dramatically slow down its expertise to scope adjusted EBITDA profitability (previously projected to beryllium successful 2025), indicating much outer financing will apt beryllium needed earlier it could move profitable.

Accordingly, guidance highlighted that it has $4.9B successful full liquidity, which Lucid expects to beryllium capable to tide it done "at slightest into nan first 4th of 2024."

Hence, investors will apt beryllium looking astatine Lucid's astir important shareholder, Saudi Arabia's Public Investment Fund aliases PIF, to supply much backing arsenic Lucid ramps production.

Notably, nan PIF had raised its stake to 1.11B shares successful FQ4 (or a 9.2% stake). The buyout rumor by nan PIF that drove nan hype that lifted its banal to unsustainable heights has cooled significantly.

As such, investors must retrieve not to pursuit hype, peculiarly specified buyout rumors. Instead, focusing connected execution will beryllium highly captious for fledgling EV makers for illustration Lucid, still struggling to move past its first 10K successful annualized production.

We judge nan important miss against nan 21K expected accumulation guidance could nonstop much investors fleeing, particularly those who jumped successful astatine nan early January bottom.

Accordingly, Rawlinson highlighted production challenges, moreover though nan proviso concatenation disruption has abated. However, nan institution continues to look headwinds related to procuring nan basal automotive parts.

Management besides stressed that it has a "marketing" issue, arsenic nan institution plans to "broaden awareness."

Coupled pinch a diminution successful reservations from 34K successful FQ3 to 28K doesn't augur nicely pinch its near-term outlook.

The institution introduced its ain "EV credits" strategy to bolster underlying request arsenic its line-up doesn't suffice for nan IRS' scheme. However, nan deficiency of affirmative commentary from guidance connected nan take-up suggests that Lucid could beryllium facing beautiful challenging underlying request headwinds, perchance fixed its value point.

The company's mean trading price, aliases ASP based connected its caller reservations update, accrued to $96K from $94K previously, suggesting an betterment successful nan mix.

However, pinch nan macroeconomic headwinds uncertain, and higher-end user spending could beryllium deed arsenic they traded down, Lucid's premium value constituent could beryllium to beryllium a important stumbling block.

Bulls could reason that Tesla's (TSLA) caller price cuts whitethorn not straight impact Lucid's pricing strategies arsenic they run successful different segments. However, contempt that, Tesla has seen an improvement successful its bid flow. Therefore, we cannot norm retired nan imaginable for further trade-down by higher-end consumers pinch persistent inflationary headwinds.

LCID value floor plan (weekly) (TradingView)

With that successful mind, investors shouldn't beryllium amazed that LCID is down much than 17% astatine writing, arsenic nan marketplace apt anticipated further estimates cuts by analysts, fixed its disappointing guidance.

However, nan mendacious upside breakout aliases bull trap that formed successful early January had already rejected further buying advances. Therefore, nan selloff this week simply continued nan downshift complete nan past 4 weeks, arsenic investors who bought nan dips astatine nan commencement of nan twelvemonth apt took profits astutely.

We judge short-sellers could besides person reloaded, seeing nan imaginable for a decisive breakdown of LCID's momentum toward its January lows.

With nan pullback successful afloat swing, we promote investors to proceed waiting connected nan sidelines arsenic it's not clip to bargain nan pullback yet. Constructive consolidation should beryllium observed, indicating seller exhaustion earlier investors see a imaginable speculative buying opportunity connected LCID.

Rating: Hold (Reiterated, but connected nan watch for a standing change).

Are you looking to strategically participate nan marketplace and optimize gains?

Unlock nan cardinal to successful maturation banal investments pinch our master guidance connected identifying lower-risk introduction points and capitalizing connected them for semipermanent profits. As a member, you'll besides summation entree to exclusive resources including:

• 24/7 entree to our exemplary portfolios

• Daily Tactical Market Analysis to sharpen your marketplace consciousness and debar nan affectional rollercoaster

• Access to each our apical stocks and net ideas

• Access to each our charts pinch circumstantial introduction points

• Real-time chatroom support

• Real-time buy/sell/hedge alerts

Sign up now for a Risk-Free 14-Day free trial!