Long-term investing can yield significant rewards in the stock market, but it also carries the risk of considerable losses, particularly if an investor misjudges the right company at the wrong time. This lesson has been starkly highlighted for early investors in Lucid Group (NASDAQ: LCID), whose shares have plummeted by an astounding 90% since the company’s special purpose acquisition company (SPAC) debuted in 2020.
Lucid Group, an electric vehicle (EV) manufacturer, has found itself grappling with sluggish growth and mounting losses. Nonetheless, recent developments suggest a potential turnaround for the beleaguered company. In the third quarter, Lucid reported a 68% year-over-year revenue increase, totaling $336.6 million. This surge was attributed to record production and delivery figures, setting Lucid apart in an industry facing challenges such as the withdrawal of EV tax credits under the Trump administration. Notably, Lucid’s high-end vehicle offerings did not qualify for these incentives, insulating the company from some of the adverse effects experienced by competitors like Tesla and Rivian Automotive, which both saw significant declines in their deliveries.
Despite these positive indicators, Lucid remains in a precarious situation. The company reported a staggering operating loss of $942 million for the third quarter, a 22% increase from the previous year. This significant cash burn raises concerns among investors, especially given Lucid’s current market capitalization of approximately $3.3 billion.
However, Lucid’s prospects may be bolstered by its relationship with Saudi Arabia’s Public Investment Fund (PIF), which has emerged as a crucial supporter. Controlled by the PIF, which owns 64% of Lucid’s shares, the company benefits from backing that transcends mere financial return. The Saudi government is eager to diversify its economy away from fossil fuels, and Lucid plays a vital role in achieving that goal.
Recently, the PIF granted Lucid access to a credit line, providing an additional $2 billion in liquidity. This support is further complemented by a commitment from Saudi Arabia to purchase up to 100,000 vehicles over a ten-year period. Lucid has already delivered 1,000 vehicles to the kingdom in the third quarter and anticipates scaling this opportunity significantly in the coming years.
For Lucid to achieve lasting success, it must pivot toward new growth avenues, particularly in the mass-market sector. The anticipated launch of lower-priced models, including the Gravity SUV and the Lucid Earth, expected to start at $48,000, represents a strategic move to cater to a broader consumer base. Additionally, Lucid has been chosen as the partner for Uber Technologies’ autonomous taxi program, presenting further avenues for expansion.
While the road ahead remains fraught with challenges, Lucid’s capacity to recover and potentially reward patient investors is present. In the context of stock recommendations, it is worth noting that experts such as those at The Motley Fool have identified other high-potential stocks, indicating a cautious approach toward Lucid Group at this time. Investors considering the long-term trajectory of Lucid would do well to evaluate the evolving landscape and the company’s strategic maneuvers in the years ahead.
