LCID Stock Analysis: Is Now the Right Time to Buy, Sell, or Hold?

Stock Market

Lucid Group (NASDAQ:LCID) stock is one I’ve had mixed opinions of in the past. On the one hand, this is a company with some clear speculative upside, particularly as a vehicle for investors to bet on the overall electric vehicle space.

However, it’s also clear that Lucid Group is one that has been plagued by stagnant stock performance, operational challenges, and a myriad of issues around production. Indeed, even if Lucid’s performance improves, it’s unclear whether its current valuation prices this recovery in.

Thus, investors may face an EV stock with speculative upside, but a still-unfavorable risk/reward scenario.

Let’s dive into what the issues are, and whether this stock is still worth investing in right now.

Saudi Backing May Be Insufficient for Lucid Group

Lucid’s stock price has been on a wild ride over the past year. Trading at a 52-week high of nearly $18 per share following news the company would receive funding from the Saudi government, shares of LCID stock have since sunk to below $6 per share at the time of writing. That’s certainly not good news for investors looking to buy this EV stock for the long-haul.

Now, the company’s Saudi backing is important. The Saudi government invests for the long-term, and doesn’t appear to be looking to offload its position soon. Thus, there’s some added stability to the Lucid story with this key backer.

However, it’s also clear that this financial support may not be enough. The PIF sovereign wealth fund may  inject billions into Lucid to bolster cash reserves, but it won’t be a complete solution.

Addressing forward-looking demand for mid- to high-priced EV trucks is the crux of the issue for many investors. While a substantial Saudi Government order is notable, true profitability hinges on achieving significant annual EV sales, especially in the U.S. market.

Elon Musk and Lucid’s CEO

Peter Rawlinson, Lucid Motors’ CEO, now holds the highest-paid CEO title in the automotive industry, earning about $379 million annually. Despite this, Lucid’s stock has faced a decline since Rawlinson’s compensation package in 2022. While the company aims for growth, Elon Musk disapproves of its CEO’s salary structure.

Elon Musk took a jab at a rival electric vehicle company, criticizing its CEO’s high compensation despite its performance.

Responding to a CEO compensation survey, Musk warned against companies with unlinked leadership pay and referred to Rawlinson, who earned $379 million last year, dwarfing other automakers’ CEOs like Mary Barra of General Motors, who received significantly less.

Unlike last year when Musk received no stock awards or options and refused a salary, he was granted more than $23 billion in stock options in 2021 as Tesla surpassed key financial milestones. Thus, perhaps this is a case of the pot calling the kettle black.

However, it’s an interesting dynamic, to be sure, and certain investors may simply not want any part to do with a company with an incentive structure that’s completely out of whack.

What’s Next

Lucid faces significant challenges, but a turnaround is possible through improved marketing, pricing strategies, or the launch of its SUV model. However, LCID’s market cap at $14.5 billion may already account for much of its future growth potential.

Furthermore, potential future shareholder dilution could increase the required growth rate. Currently, it’s best to view LCID stock as a potential hold (for those who already own shares) and a stock to stay on the sidelines with (for those who aren’t already invested).

On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

Chris MacDonald’s love for investing led him to pursue an MBA in Finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative, long-term investing perspective.