Why This EV Maker Faces Downside Of Over 60% From Current Levels

Zinger Key Points
  • Report says Lucid could fall to $7 from around $19 currently.
  • Lucid could be in a for a much higher downside than peer EV stock Rivian.

Electric vehicle stocks came under significant selling pressure this year, leaving most of them as pale shadows of their old selves. As sentiment begins to turn around, one EV stock is facing the risk of losing more than half of its market capitalization, according to a Barron's report.

High-end Focus Bane For Lucid: The market for ultra-expensive cars, both traditional or electric, is small, and that's the reason well-entrenched players such as Tesla, Inc. TSLA are focusing on low-cost vehicles such as the Model 3, Barron's said in the report.

Lucid may be targeting car sales of about 13,000 in 2022, but volume will flatten or decline as the high-end market saturates, the report said. This would be very bad news for Lucid's multiple, it added.

The report also highlighted Nio Inc's NIO predicament. The Chinese manufacturer of high-end EVs saw its stock decline over 47% during the past year, leading to multiples dropping from about eight times forward sales in early 2021 to about 2.4 times 2023 sales, the publication added.

Though some of it may be due to problems with the Chinese economy, much is attributable to volume growth that stalled in recent months, Barron's said.

"If Lucid were to trade like its peers based on 2023 sales estimates, it could fall to about $7 a share, down 64% from its Friday closing price of $19.21," the report said.

This is despite the stock having already plunged about 63% from its 52-week high of close to $58.

Related Link: Elon Musk Takes A Dig At Lucid, Explains Why He Isn't Pushing For Longest Range EV

Lucid Has Much Higher Downside Than Rivian: Future Fund co-founder Gary Black said in a tweet that he sees much higher downside for Lucid stock than Rivian Automotive, Inc. RIVN.

The analyst noted that Lucid has $3.2 billion net cash and is likely to use $3.5 billion free cash flow in 2022 compared to $14.8 billion and $6.4 billion, respectively for Rivian, Black said.

Lucid's total addressable market is about 15% of the U.S. market, lower than the 71% of the market in which Rivian operates, he added.

Lucid closed Friday's session down 0.47% at $19.21, according to Benzinga Pro data.

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