Lucid (NASDAQ: LCID) stock plummeted to a new low during Thursday’s trading, enduring a 4.7% drop. At its worst, the stock had nosedived by 8.3%, as per the data from S&P Global Market Intelligence
A key factor precipitating the fall was Tesla slashing the price of its Model Y vehicle by 5,000 euros (about $5,430) in Germany, along with similar cuts in France, Norway, and the Netherlands. This move comes on the heels of substantial price reductions by Tesla on its Model 3 and Model Y models last week.
An Unwise Buy?
Lucid, a relative newbie in the EV sector, went public via a special purpose acquisition company (SPAC) merger in July 2021. After the recent setback, the company’s shares have plummeted nearly 95% from their peak.
LCID PS Ratio (Forward) data by YCharts
Despite the substantial devaluation, the company is still being valued at around 4.6 times this year’s anticipated sales. More critically, the company is a long way from shifting to profitability, even under an optimistic business trajectory.
In Q3 of 2023, Lucid raked in $137.8 million in revenue from delivering 1,457 vehicles. The quarter culminated in the company sitting on approximately $4.4 billion in cash, equivalents, and short-term investments, but it’s quickly burning through it. During the period, Lucid incurred a staggering net loss of roughly $752.9 million.
The company’s ability to survive hinges on significantly amplifying vehicle production and sales while upholding substantial pricing power in the ultra-luxury market. With Tesla once again reducing vehicle prices and major automakers like General Motors and Ford scaling back their EV production plans, Lucid’s near future in a weakened demand environment appears challenging.
Although the stock is trading at a massive discount from its peak, Lucid stock is rife with risk. If the company successfully confronts the impending challenges and edges closer to profitability, its stock could soar above the current price levels. Nevertheless, investors must appreciate the tough odds the business faces, as its already beleaguered stock might see further declines.
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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool recommends General Motors and recommends the following options: long January 2025 $25 calls on General Motors. The Motley Fool has a disclosure policy.
