Why there has never been a better time to buy Lucid Group shares
It seems like every week a booming electric vehicle (EV) business Lucid group (NASDAQ: LCID) made the headlines.
On September 16, Lucid was crowned King of Range, as his Lucid Air Dream Edition sedan achieved an official range of 520 miles according to the Environmental Protection Agency (EPA), the highest of any vehicle. electrics never evaluated by the EPA.
As good as the news was, Tuesday was arguably the company’s most encouraging announcement of the year. Lucid kicked off its production preview week on Monday at its manufacturing facility in Casa Grande, Ariz., Opening its doors to media, analysts and other guests for the first time. All was calm on the Western Front until Lucid announced late Tuesday afternoon that he had officially started mass production of the Lucid Air and would begin deliveries to customers in late October. As of this writing, Lucid’s shares are up about 9% on the day and over 25% last month.
Despite the higher price, there has never been a better time to buy shares of Lucid Group. Here’s why.
A little background
Expectations for Lucid were high even before its merger with Churchill Capital IV, a specialist acquisition company, in mid-July. The company directly questions You’re here‘s (NASDAQ: TSLA) Models, Daimler‘s (OTC: DDAI.F) Mercedes-Benz S-Class range and other luxury brands such as Porsche, Audi and Tata Engines‘Jaguar. Lucid’s competitive advantage lies in its technology: the company has been able to achieve performance, power and range from an efficient sized battery pack. Its integrated powertrain is developed in-house, which increases costs but leaves Lucid more in control of its design and production.
The company’s high-level management team, flashy marketing and unabashedly confident events and presentations have given investors ambitious goals. Advice from its most recent investor presentation suggests 20,000 vehicle deliveries and $ 2.22 billion in revenue in 2022, rising to 251,000 deliveries and $ 22.8 billion in revenue by 2026. Go from 0 deliveries annuals to 251,000 annual deliveries in about five years would be an unprecedented feat. For comparison, consider that Tesla produced 510,000 vehicles in 2020 and generated $ 31.5 billion in revenue. Tesla is expected to deliver a record 230,000 vehicles in the third quarter.
Living up to the hype
Lucid is young and untested, so his screenings should be greeted with some skepticism. But to its credit, the company continues to show investors that it can meet high expectations.
For starters, its merger with Churchill gave the company about $ 4.4 billion in net spending cash, which it uses to ramp up spending, expand its manufacturing facility, and develop lower-end versions of Lucid Air SUVs. and Lucid Gravity.
On the demand front, Lucid has shown that he can quickly increase bookings even before selling a single car. In his May presentation, Lucid announced that bookings exceeded 9,000. In a June disclosure, he reported over 10,000 bookings. 11,000 reservations were reported at the end of July. And as of yesterday’s press release, Lucid now has over 13,000 bookings.
On the production side, Lucid successfully opened its manufacturing facility, tweaked its car by building 89 pre-production models in June, entered mass production at the end of September (which was in line with its estimate for the second half of 2021), and will begin deliveries in the fourth quarter.
And finally, on the vehicle front, the Lucid Air topped the company’s previous range estimate, management executed their vision well.
In summary, Lucid did just about everything he said he was going to do, and on time, which is impressive given the supply chain issues and the global chip shortage.
Fewer unanswered questions
Just because Lucid has said he’s gone into mass production doesn’t mean it’s going to be smooth sailing from here. The company will need to prove that it can continue to generate demand, increase production, eventually achieve positive operating cash flow and become profitable in order to justify a higher valuation. However, it’s safe to say that there has never been a better time to invest in Lucid stocks.
Less than three months ago, Lucid still needed shareholders to approve his merger with Churchill in order to obtain the liquidity necessary to grow his business. It also didn’t answer the only question investors wanted to know – when would mass production begin. As Lucid began his week of production on Monday, there was speculation he would announce a firm production start date. This is exactly what he did, and the stock increased accordingly. The point is that uncertainty, for better or for worse, tends to decrease as a business matures.
As an investor, the earlier you choose to invest in a growth stock like Lucid, the more risk / rewards you will get. Invest in Amazon in 2005 was much riskier than today, but it was also more rewarding. However, buying a startup that ends up failing early can wipe out an investment. In five years, Lucid could very well be worth a lot more or a lot less than it is today. An investor can certainly wait and see if Lucid can become an established automaker, but in doing so, he could leave profits on the table.
A better buy despite the higher price
Over the past month, Lucid stock has gained in value. But it’s arguably a much better buy than before due to the rave reviews from Motor trend, favorable EPA ratings and the dawn of mass production. Investing in Lucid today still requires a high tolerance for risk, but it’s an easier investment to make now that Lucid actually produces cars.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.