Lucid Warning: Why LCID Stock Is a Clunker of an EV Play

Last month, electric vehicle stocks spiked in price, including Lucid Group (NASDAQ:LCID). There are two reasons why LCID stock and other names in the space moved higher.

For one, there were rising hopes of improvements ahead for the two biggest issues weighing over both the economy and the stock market: high inflation and high interest rates.

This led to a cycling back into speculative growth plays, which are very sensitive to macro factors like interest rates.

Second, and more pertinent to EV stocks, strong delivery numbers from market leader Tesla (NASDAQ:TSLA), as well as from fellow startup Rivian Automotive (NASDAQ:RIVN) fueled a massive boost in sentiment for vehicle electrification plays across-the-board.

More recently, though, this excitement has simmered down. LCID has coughed back its gains from this latest round of “EV mania.” If that’s not bad enough, more declines may lie ahead.

LCID Stock: Weak Delivery and Earnings

As I mentioned in my last update on LCID stock, the company’s terrible delivery numbers for Q2 2023 point to an earnings letdown.

Lucid delivered only 1,404 vehicles between April 1 and June 30, less than 65% of the vehicles it produced during this period. Delivering two fewer vehicles than it did last quarter, the EV maker also reported yet another sequential decline in deliveries.

In contrast, Rivian delivered about nine times as many vehicles last quarter, and deliveries relative to total production was very high (around 90%).

On a sequential basis, Rivian’s deliveries were up by nearly 60% quarter-over-quarter, from 7,946 vehicles, to 12,640 vehicles.

I am bearish on RIVN stock, but that early-stage EV company (with its recent impressive delivery data) has far more backing the bull case for it compared to LCID.

That said, even if Lucid manages to report “less bad” quarterly results (despite the weak delivery numbers), don’t assume such a positive surprise will make it a buy.

Why a Post-Earnings Boost Won’t Last

Poor delivery numbers notwithstanding, LCID stock admittedly isn’t guaranteed to drop once its latest results and guidance hit the street. For instance, Lucid could make up for a lack of deliveries growth last quarter, by providing promising guidance for the second half of the year.

Any positive updates regarding cash burn could also result in a favorable reaction among the investing public. Yet while it is possible the latest updates from Lucid’s management may save the day, causing shares to move higher instead of lower after earnings, if (and it’s a big if) this happens, don’t expect this post-earnings boost to last.

For one, the Lucid brand is still struggling to gain traction.

Current efforts to boost demand, like aggressive price cuts for its Air line of luxury EV sedans, will likely at best provide a temporary boost in demand, all while weighing on margins/increasing cash burn.

Unless Lucid suddenly starts to build a Tesla-esque following (even a small one like the following Rivian has developed), pessimism about Lucid’s ability to scale towards profitability will re-emerge.

That’s not all. Assuming cash burn continues in the foreseeable future, chances are another big issue will keep weighing on the stock.

Set to Remain a Clunker Until Key Issues Ease

So, what is the other issue affecting LCID shares lately? Shareholder dilution has also had an impact on the stock’s performance.

It’s good news for Lucid’s management, employees, and customers that the company’s majority shareholder (Saudi Arabia’s Public Investment Fund, or PIF) has remained willing to provide additional capital infusions to keep the lights on, and the company’s war chest filled.

But is it good news for shareholders? Unless Lucid’s operating performance soon turns a corner, it’s not.

If Lucid continues selling newly-issued shares to PIF and other deep-pocketed buyers, all while continuing to report lackluster results, the value of each share will likely continue to tumble down.

Until this floundering EV upstart begins to report stronger demand for its vehicles, and becomes less reliant on secondary rounds of financing, LCID stock is set to remain a clunker, so stay away.

LCID stock earns a D rating in Portfolio Grader.

On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.

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