On Monday (NASDAQ:MNDY), R.F. Lafferty analyst Jaime Perez upgraded Lucid Group Inc. (NASDAQ:LCID) shares to Buy from Hold, maintaining the price target at $4.00. The upgrade reflects Lucid's reaffirmed annual production goal of 9,000 units and a reduction in capital expenditures by $300 million to $1.0 billion for 2024. Lucid's management believes the company has sufficient liquidity to last into 2026 following a recent capital increase.
Lucid Group has started accepting orders for its new model, the Gravity, this week. The company is preparing for a "soft production" soon and will provide more details about the start of customer deliveries in the following weeks. Moreover, Lucid's midsize vehicle platform is slated to begin manufacturing in 2026.
The analyst's decision is based on Lucid's cost improvements, volume growth, and a strong balance sheet. The $4 per share price target is anchored in the projected 2025 sales of $1.0 billion and a price-to-sales multiple of 10.0x, reflecting an anticipation of higher sales volumes. Lucid's cost structure has shown signs of improvement while maintaining consistent sales growth.
The company's upcoming Gravity model is expected to hit the roads next year, which is projected to drive volume growth throughout the year. The management strategy to roll out the SUV at a measured pace is aimed at preserving the cost improvements achieved, which could enhance the company's gross margins.
To date, Lucid has raised approximately $4 billion in capital this year, ensuring its funding through the start of production (SOP) for both the Gravity and its midsize platform. This capital raise is expected to support the company's operations and growth into 2026.
In other recent news, Lucid Group has reported a substantial increase in revenue and vehicle deliveries. The electric vehicle manufacturer recorded a 91% year-over-year increase in vehicle deliveries, totaling 2,781 units in the third quarter. Revenue also saw a significant rise of 45.2% on a year-over-year basis, reaching approximately $200 million.
Despite these positive developments, Lucid reported an adjusted EBITDA loss of $613.1 million, primarily due to non-cash losses associated with derivative liabilities. In addition, Stifel has revised its price target for Lucid Group to $3.50, while maintaining a hold rating. This adjustment follows Lucid's third-quarter financial performance and the recent equity raise of $1.75 billion.
Furthermore, Lucid has initiated pre-orders for its anticipated Gravity SUV, reflecting potential consumer interest in the company's expanding product lineup. These recent developments highlight Lucid Group's ongoing efforts to strengthen its market position and operational growth.
InvestingPro Insights
Adding to the analysis of Lucid Group's recent upgrade and future prospects, InvestingPro data provides additional context to the company's financial situation. As of the last twelve months ending Q3 2023, Lucid's revenue stands at $730.51 million, with a notable quarterly revenue growth of 45.15% in Q3 2023. This aligns with the analyst's expectations of volume growth and supports the company's reaffirmed production goals.
However, it's crucial to note that Lucid is currently operating at a loss, with a gross profit margin of -132.4% and an operating income margin of -411.28%. These figures underscore the challenges faced by the company as it scales production and works towards profitability.
InvestingPro Tips highlight that Lucid holds more cash than debt on its balance sheet, which corroborates the analyst's mention of a strong balance sheet. This financial position is crucial for supporting the company's operations and growth plans through 2026, as mentioned in the article.
Another relevant InvestingPro Tip indicates that analysts anticipate sales growth in the current year, aligning with the expectations surrounding the launch of the Gravity model and the company's production targets.
For investors seeking a more comprehensive analysis, InvestingPro offers 11 additional tips for Lucid Group, providing a deeper understanding of the company's financial health and market position.
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