Shares of Lucid Group experienced a significant surge, climbing 13.8% to close on Friday, amidst what appeared to be positive news regarding the company’s stock outlook. However, a closer inspection reveals that the apparent optimism may be misleading, as the recent price target adjustment by Cantor Fitzgerald analyst Andres Sheppard could actually indicate a downgrade rather than an upgrade.
Sheppard has raised his price target on Lucid shares from $3 to $20. At first glance, this substantial increase suggests a newfound confidence in the electric vehicle manufacturer. However, this increase follows a recent reverse stock split in which Lucid executed a 1-for-10 exchange, ultimately changing the way shares are valued. Following this split, Lucid’s stock is now priced around $18 per share. Thus, Sheppard’s target of $20 implies a potential upside of less than 10% over the next year, which effectively reduces the prior prediction that the stock could achieve a 50% gain.
This calculation raises crucial questions about the company’s ongoing struggles. Notably, Lucid Group has yet to record a profit and most analysts predict it may not see profitability until 2031. The company is currently burning through nearly $3 billion annually, with cash reserves falling below that amount. As a result, there are growing concerns that Lucid Group may not survive long enough to reach its projected positive financial turnaround.
While Sheppard maintains a “neutral” rating on the stock, many in the investment community believe a “sell” recommendation would be more appropriate, given the company’s precarious financial position and dim profitability prospects. Investors are perhaps responding to the buzz around electric vehicles and potential future growth, but the underlying realities of Lucid’s financial state, coupled with the adjusted forecast, suggest caution is warranted.
The apparent enthusiasm around Lucid’s stock price increase, juxtaposed with the analyst’s actual implications, presents a complicated narrative for current and prospective investors. As Lucid Group navigates these turbulent waters, the future of the company remains uncertain amid significant financial challenges.
