Lucid Stock: Q4 Earnings Preview

Gregg DeGuire/Getty Images Entertainment

Article Thesis

Lucid Group, Inc. (NASDAQ:LCID) will study its fourth-quarter net results connected Wednesday, February 22. We will return a look astatine what investors tin expect from nan quarterly study and astatine what Lucid's outlook looks for illustration going forward.

What Can We Expect From Lucid's Q4 Earnings Report?

When Lucid reports its quarterly results adjacent week, 2 of nan astir important metrics will beryllium Lucid's accumulation and its deliveries. Lucid is, dissimilar peers specified arsenic Tesla (TSLA), astatine a shape wherever it isn't profitable anyways. Its biggest task is ramping up accumulation and deliveries, arsenic Lucid will person to turn its business considerably earlier it yet becomes profitable.

During nan 3rd quarter, Lucid Group managed to nutrient 2,280 vehicles, which was nan champion output successful nan company's history. That is to beryllium expected, of course, arsenic nan institution is successful nan "ramping" stage, frankincense quarter-to-quarter maturation should be positive, which will mean that nan institution will person galore grounds quarters going forward.

During nan 3rd quarter, Lucid had delivered 1,400 vehicles to customers. That's importantly little than nan number of vehicles produced, which makes consciousness -- it takes a while for Lucid to present a conveyance erstwhile it is produced, frankincense deliveries are increasing pinch a lag versus produced vehicles. Similar trends were seen erstwhile different EV players were successful a akin stage.

For 2022, Lucid has forecasted accumulation of 6,000 vehicles to 7,000 vehicles arsenic of nan extremity of nan 3rd quarter. Earlier, Lucid had guided for importantly higher accumulation numbers, but guidance had been reduced owed to issues specified arsenic proviso concatenation disruptions and immoderate headwinds successful ramping up accumulation connected time. Since nan institution produced little than 1,000 vehicles successful Q2, and since Q1 accumulation was debased arsenic well, it is apt that Q4 accumulation levels were importantly higher than Q3 accumulation of 2,280 -- depending connected wherever precisely successful nan 6,000 to 7,000 scope Lucid ends up.

Lucid's accumulation maturation during Q3 will apt consequence successful meaningful deliveries maturation successful Q4, arsenic much vehicles will apt person made nan transit to customers. This, successful turn, will consequence successful higher revenues versus nan 3rd quarter. Analysts are predicting that Lucid Group will study income of $274 cardinal for nan quarter, which would beryllium up 41% versus nan 3rd quarter. If Lucid has delivered each nan vehicles it has produced during nan 3rd 4th during nan 4th quarter, its deliveries would beryllium up much than 60% sequentially. Importantly, however, Lucid's income operation will alteration complete time. While nan institution only sells 1 model, nan Air, for now, this exemplary is sold successful different sub-types, specified arsenic nan Dream, nan Grand Touring, and truthful on. Lucid produced nan highest-spec and highest-priced sub-types first, frankincense it would not beryllium astonishing to spot its mean income value diminution somewhat complete time. There's an exception, nevertheless -- nan highest-end type, nan Sapphire, will beryllium sold this year. Nevertheless, Lucid's income operation will apt consequence successful gross increasing slower than deliveries, frankincense nan forecasted gross maturation complaint -- little than nan deliveries maturation complaint -- makes sense.

Lucid is not profitable, and will astir apt not beryllium profitable for rather immoderate time. Still, investors should facet successful Lucid's profitability capacity erstwhile evaluating nan company. Even erstwhile Lucid generates nett losses, location tin beryllium affirmative aliases antagonistic trends successful its profitability. A mates of examples:

- Is Lucid's gross separator improving? If yes, that indicates that Lucid is making advancement successful ramping up its accumulation while bringing down expenses (on a per-vehicle basis). If not, Lucid isn't becoming much efficient, which would beryllium a problem. During nan 3rd quarter, Lucid's gross separator was antagonistic astatine -200%, meaning nan company's costs of gross was measurement higher than its revenue. There frankincense is simply a large request for improvement complete nan coming quarters if Lucid ever wants to beryllium profitable.

- Are operating expenses increasing faster aliases slower than revenue? If operating expenses, e.g. for management and sales, are increasing slower than Lucid's revenue, that is simply a affirmative sign. It intends Lucid benefits from operating leverage, which will positively effect its margins successful nan future. If LCID's operating expenses turn faster than its revenue, that indicates that nan institution is becoming little businesslike and that operating margins will stay nether unit moreover if LCID manages to turn its gross separator meaningfully successful nan future.

Another important facet for investors to see is nan company's equilibrium sheet. Lucid Group is not generating immoderate affirmative operating rate travel correct now, frankincense nan institution has to utilize nan rate it holds connected its equilibrium expanse for maturation investments and for backing its operating rate burn. At nan extremity of nan 3rd quarter, Lucid's rate position totaled $1.26 billion, while nan institution besides had $2.08 cardinal successful short-term investments that tin beryllium easy turned into cash. In total, that's astir $3.3 cardinal -- a sizeable magnitude of rate and equivalents, but Lucid besides has a beautiful superior rate pain complaint for now. During nan first 3 quarters of 2022, Lucid burned done $2.4 cardinal betwixt its operating rate pain and its superior expenditures, which is adjacent to astir $3.2 cardinal connected an yearly tally complaint basis. In different words, Lucid's rate position, including short-term investments, was adjacent to astir 1 twelvemonth worthy of its rate needs astatine nan extremity of nan 3rd quarter. Investors will want to look for clues whether nan rate pain complaint has improved during nan 4th quarter.

The company's $600 cardinal at-the-market programme that was announced during Q4 has apt besides had an effect connected LCID stock's rate position, though that, of course, comes astatine a costs -- Lucid's stock count astir apt has continued to climb. A rising stock count dilutes existing shareholders, arsenic their shares correspond a declining information of nan company's wide value. Over nan past year, dilution has been very important astatine Lucid:

Data by YCharts

And since Lucid is still beautiful acold from being profitable and generating affirmative free rate flows (or moreover affirmative operating rate flows), investors tin expect further dilution successful nan coming quarters and years, I believe, until Lucid is capable to move to a self-funded exemplary eventually.

A non-financial point that will beryllium important going guardant is Lucid's planned adjacent model, nan Gravity SUV. Lucid plans to unfastened reservations successful early 2023, truthful we could get immoderate news connected that during nan net call. The exemplary will apt commencement deliveries successful 2024 if everything goes arsenic planned. While nan Gravity will astir apt beryllium a high-priced conveyance arsenic well, it expands Lucid's addressable marketplace importantly and is frankincense an important measurement successful increasing nan institution successful bid to make it profitable eventually, arsenic standard advantages tin beryllium captured complete time.

Takeover Speculation And Final Thoughts

Lucid Group has fixed backmost immoderate of nan gains that were made successful nan caller past pursuing speculation that Saudi Arabia's sovereign wealthiness money mightiness beryllium willing successful acquiring nan company. That has, truthful far, not happened, which is why nan marketplace has go little excited astir a imaginable takeover bid. That being said, Saudi Arabia has added to its Lucid stake, increasing nan position from 1.02 cardinal shares to 1.11 cardinal shares during nan 3rd quarter. I personally judge that buying Lucid solely arsenic a takeover speculation play is not a awesome idea, arsenic it is acold from guaranteed that Saudi Arabia is willing successful taking nan institution over.

While Lucid's models are looking bully and while they are appealing from a tech perspective, Lucid is still beautiful acold from being profitable. While Q4 should beryllium stronger than Q3, Lucid will pain done a batch of money until it yet is capable to self-fund its early growth. Since Lucid is weighted astatine astir $20 cardinal contempt not being capable to make immoderate nett profits aliases free rate flows successful nan foreseeable future, I judge that Lucid is simply a alternatively risky finance astatine existent prices. If nan institution is successful successful ramping up its business and if caller exemplary introductions grow nan addressable marketplace massively, Lucid could beryllium a coagulated finance eventually. But these things are acold from guaranteed, which is why I for illustration to enactment connected nan sidelines for now.

Is This an Income Stream Which Induces Fear?

The superior extremity of nan Cash Flow Kingdom Income Portfolio is to nutrient an wide output successful nan 7% - 10% range. We execute this by combining respective different income streams to shape an attractive, dependable portfolio payout. The portfolio's value tin fluctuate, but nan income watercourse remains consistent. Start your free two-week proceedings today!