Lucid (NASDAQ:LCID) stock has drifted well off its highs and is now looking like quite a bargain. From a peak price of $55.52 on Nov. 16, LCID stock has drifted down to $38.64 as of Dec. 27. It looks like the stock could end up having a good 2022 as well.
Since closing its special purpose acquisition company (SPAC) merger in July when the stock was in the mid-$20s, LCID stock has risen at least $15, or about 60%. But that does not mean this electric vehicle (EV) stock can’t keep rising. This is despite Lucid shares being off their peak price. As a result, expect to see LCID stock move higher this year.
Where Things Stand at Lucid
One reason the stock’s price will rise is that analysts still expect revenue to increase next year. For example, they now estimate revenue will hit $2.07 billion in 2022 based on a survey by Seeking Alpha.
This is slightly lower than the company’s own projections in its slide deck presentation, as seen on page 65. That is where it projects $2.2 billion in sales for 2022. Maybe that is one reason why the stock has drifted lower. Nevertheless, there is no question its sales will likely surge next year.
Moreover, the company expects its revenue will ramp up significantly by the end of 2023. Its projections call for 49,000 EVs delivered, up from 20,000 in 2022. Moreover, revenue is projected to reach $5.53 billion by the end of 2023.
Right now LCID stock has a market cap of $62 billion. That represents just 11.2 times its 2023 forecast sales. This is an aggressive valuation, but it’s not completely unrealistic.
To get this far, the company is going to have to spend a good deal on capital expenditures (capex). During a conference call, CFO Sherry House said Lucid’s capex spending will rise next year. It is going to pull forward $350 million of future capex spending to 2022.
As a result, Lucid is lucky to have enough cash on its balance sheet. The CFO said the $4.6 billion in cash it expects to have on its balance sheet will get it through 2022.
However, just to make sure things work out, the company closed on a $1.75 billion convertible senior note offering on Dec. 10. This debt financing comes with a low 1.25% coupon rate, so the interest costs won’t be too severe. Depending on how much it burns through in this quarter, this will substantially increase its cash pile.
Where Things Stand With LCID Stock
TipRanks reports that three analysts have an average price target of $42.75 per share. That represents a 10.6% potential upside for investors in LCID stock.
Keep in mind the stock now has a market valuation of $62 billion. That puts it on a 6.26 price-to-sales (P/S) multiple for the 2024 year based on the company’s projections.
That is a low multiple, but it will be higher after adjusting it for the present value of money. For example, assuming a 10% discount rate over 3 years, the 2024 revenue adjusts by 75.1% to $7.46 billion. That puts it on a forward P/S multiple of 8.3 times.
This is a bit lower than Tesla (NASDAQ:TSLA), for example, which trades at 8.75 times revenue using estimates from Seeking Alpha. That is 5.4% higher than today’s market valuation of Lucid.
The bottom line is that LCID stock is worth between 5% and 10% more based on analysts’ and the company’s own projections.
On the date of publication, Mark R. Hake did not hold any position (either directly or indirectly) in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Mark Hake writes about personal finance on mrhake.medium.com and runs the Total Yield Value Guide which you can review here.
