Lucid Stock (NASDAQ:LCID)
The most recent production forecast from the electric vehicle start-up Lucid came in significantly lower than expected, which caused alarm bells to sound on Wall Street.
Lucid (NASDAQ:LCID) announced on Wednesday evening that the company intends to produce between 10,000 and 14,000 vehicles in 2023. On Wall Street, they were anticipating a number closer to 20,000. In addition to this, the number of vehicle reservations received as of February 21 was 28,000 units, which is a decrease from the 34,000 units reported on November 8.
Additionally, management stated that going forward, it will no longer provide reservation numbers.
On Thursday, shares ended the day with a loss of 11.9%, trading at $8.79, while the S&P 500 SPX and the Nasdaq Composite COMP both posted gains of 0.5% and 0.7%, respectively.
It was not a very successful period. On Thursday morning, the BofA Securities analyst John Murphy changed his recommendation for the shares from Buy to Hold. His price target decreased from $18 per share to $10 per share. Murphy stated that he “substantially” reduced his estimates and that he now anticipates that it will be the year 2027 before Lucid begins to generate positive free cash flow.
According to what Murphy wrote, “the 2023 production outlook of 10,000 to 14,000 vehicles was meaningfully below our expectation.” Prior to reading the earnings report, Murphy had predicted that the company would produce 27,000 units in 2023. We had originally anticipated that Lucid would not have the need to raise additional capital until much later.
The firm reported that it finished the period with approximately $5 billion in liquidity and predicted that this level should be sufficient to carry it through the first quarter of 2024.
Analyst Andres Sheppard from Cantor Fitzgerald maintained his Buy rating on shares of Lucid, but after the quarter he reduced his price target for the stock from $18 to $13. In a report that was released on Thursday, the analysts stated, “We become a bit more conservative in the short term amidst persistent negative gross margins, lower-than-expected production guidance, and liquidity needs.”
Sheppard is under the impression that the electric vehicle technology that Lucid has developed in-house is at the forefront of its field. However, his optimistic outlook puts him in the minority among his peers. In total, four of the eleven analysts who cover Lucid stock recommend purchasing shares at a rate of 36%. About 58% of the stocks in the S&P 500 are rated as Buy by market analysts on average.
In comparison to where it was a few days ago, the current average price target that analysts have set for a share of the company’s stock is just under $12.
Lucid stock has dropped below the $9 level, where it was trading before an article published on January 27 raised expectations that the company would be acquired by a Saudi investment fund. Lucid stock is currently trading at $8.79 per share. As a result, the price of the stock reached a high of $17.81.
During the earnings conference call that took place on Wednesday, management was questioned about the takeover.
Sherry House, Lucid’s Chief Financial Officer, responded to this question by saying that the company does not comment on rumors that are circulating in the market. “In our prepared remarks, we stated that [the Saudi Public Investment Fund] has demonstrated a commitment….we are very grateful for the partnership,”
Since 2018, the Saudi Public Investment Fund has provided the company with approximately $3.6 billion in funding.
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