January 31, 2023

A top Wall Street analyst says this EV stock could cut in half this year

Shares of Lucid Group Inc (NASDAQ: LCID) have already doubled this year but a top Wall Street analyst says they’ll give it all back over the next twelve months.

Lucid shares could make a new all-time low

On Tuesday, Morgan Stanley’s Adam Jonas reiterated his “underweight” rating on the electric vehicles manufacturer and warned of a potential decline to $5.0 only.

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Much of the year-to-date gain in Lucid shares came last week on reports of a potential buyout from Saudi Arabia’s Public Investment Fund. The analyst agreed that it could help with supply chain, infrastructure, technology and talent acquisition over the long term, but wrote:

We believe the fundamental outlook facing Lucid Group Inc is more likely deteriorating than improving.

Higher rates could be another headwind for an unprofitable name like Lucid Group Inc.

Lucid Group has a long way to break even

In its latest reported quarter, Lucid Group saw an 8.0% sequential decline in net reservations, which, Jonas says, will continue now that Tesla has slashed prices for its EVs by as much as 20%.

On a free cash flow basis, the Morgan Stanley analyst does not expect Lucid Group Inc to break even before 2026. Over the next three to four years, he sees an increase of about 25% in its diluted outstanding shares.

Jonas is dovish on Lucid shares also because its “ultra-premium priced cars” will likely lose demand in a recession. He anticipates the Nasdaq-listed firm to burn through $900 million a quarter on average in 2023.

Earlier in January, though, Lucid Group said it produced 7,180 vehicles last year – better than the top end of its previous guidance.

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