The financial involvement of a single investment fund is not a solid foundation for a bullish outlook on Lucid Group’s stock. It is crucial for wise investors to consider the comprehensive landscape when evaluating a company’s prospects. Despite the monetary backing from a significant investor, Lucid Group’s stock is graded poorly.
Diminishing enthusiasm for electric vehicles (EVs) places manufacturers like Lucid Group in a challenging position. In an environment where consumer demand is waning, investors must exercise discernment. A solitary news event is unlikely to have a lasting impact on the future trajectory of Lucid Group’s stock.
Ayar Third Investment Company, an affiliate of Saudi Arabia’s Public Investment Fund (PIF), has committed to buying $1 billion in Lucid Group preferred stock.
It appears that the PIF has a considerable appreciation for Lucid Group, holding a majority stake of 60%. This concentration of ownership could pose risks for Lucid Group’s stock if the PIF ever decides to reduce its position.
Moreover, the recent investment is not the first instance of the PIF’s involvement with Lucid Group. Previously, a considerable number of shares were purchased by the PIF for around $1.8 billion. Despite these investments, Lucid’s stock price has not demonstrated consistent growth.
Since the announcement in mid-2023, Lucid’s stock declined from $7.76 to approximately $3. This decline indicates that substantial investments from the PIF do not guarantee a rise in stock value. Additionally, Lucid continues to face significant challenges:
- Lucid’s vehicle production in 2023 fell short of its own projections, with only 8,428 vehicles manufactured against an anticipated 10,000+. The forecast for the current year is set at around 9,000 vehicles.
- The pricing of Lucid’s vehicles remains unattainable for a broad segment of consumers, even after price adjustments.
- Lucid’s total vehicle deliveries for 2023 stood at just 6,001 units, raising questions about the viability of its premium pricing strategy.
- The company remains unprofitable, with its net loss expanding to $654 million in the final quarter of 2023, compared to a loss of $473 million in the corresponding quarter of the previous year.
- Despite the PIF’s recent investment in preferred shares, Lucid’s CEO admitted to substantial quarterly cash burn rates, roughly equating to the entirety of the PIF’s investment.
Lucid Group’s financial burn rate is alarming, consuming $1 billion each quarter. Hence, the PIF’s investment does little to secure Lucid’s financial future.
When considering the PIF’s latest investment, prospective investors should approach the news with skepticism and not accept company statements at face value.
Investors must discern what truly influences the company’s value. Despite attempts to portray the PIF’s investments positively, Lucid still grapples with numerous pressing issues. As a result, a poor rating is assigned to Lucid Group’s stock, and it is not recommended as an investment option.