Citigroup Analyst Says $57 or Bust for Lucid in 2022

Citigroup analyst Itay Michaeli resumed coverage of Lucid (NASDAQ:LCID) on Jan. 3 with a buy rating. Even better, Michaeli gave LCID stock a 12-month price target of $57.

The Lucid Motors (LCID) logo is displayed in front of an ad for the Air sedan.
Source: T. Schneider / Shutterstock.com

As I write this, the analysts’ target price suggests the maker of luxury electric vehicles (EVs) has almost 50% potential upside in the year ahead. 

In early December, I recommended that investors considering Nio (NYSE:NIO) or Lucid as a play on the trend to EVs, split their bet 60/40 in favor of Nio. 

A month later, the boost from Citigroup’s analyst suggests a 50/50 split might be appropriate for the year ahead. 

Here’s why. 

LCID Stock to $57

It’s important to point out several pieces of information before you jump online to place an order for LCID stock. 

First off, Michaeli’s target price is one of the highest of Wall Street professionals covering Lucid stock. The second is that the Citigroup analyst is one of only five people covering the EV company. Barron’s contributor Al Root points out that a company of Lucid’s size — $62 billion market capitalization as of writing — ought to have more than 20 analysts covering its stock. It has just five. 

According to MarketWatch, of the five analysts covering LCID, two rate it a buy; one has it at overweight, another has LCID as a hold, and the final analyst recommends investors sell. The low is $16, the high is $60 and the average is $44.33.

Considering it’s expected to lose $1.42 a share in 2021 and $1.03 in 2022, there’s still a long way to profitability. For this reason, I felt Nio was the least risky of the two EV investments. 

The Road Ahead

Barron’s points out that Michaeli rates Tesla (NASDAQ:TSLA) a sell with a target price of $262, well off its current price above $1,100. 

I find it hard to believe TSLA stock is going to lose 77% of its value over the next 12 months — it just reported that it delivered 308,000 vehicles, 17% higher than the analysts’ estimate. However, there’s no question that Elon Musk’s baby is becoming more like a traditional car company with every passing day. 

Lucid and companies like it are the future of EVs. 

“‘We are constructive on the Lucid story and its position in the EV/Car of the Future theme,’ wrote the analyst in a report on Monday [Jan. 3]. He believes Lucid has industry leading range and charging performance as well as solid internally developed self-driving features,” Root reported.

Following on Michaeli’s investment thesis for Lucid and Tesla, I’m guessing he would put Rivian Automotive (NASDAQ:RIVN) in the same camp as Lucid because it’s still in pre-sale mode. At the same time, Nio would likely be valued more along the lines of Tesla because it has been delivering EVs since July 2018

So, putting words in the analyst’s mouth, the potential upside for Lucid’s valuation is much greater than Tesla’s because as the volumes build in 2022 and beyond, the company’s value would follow along. 

Or, put another way, investors will pay more for potential than they will for actuality. 

The Bottom Line on LCID Stock

I don’t think there’s any question that LCID stock is an excellent long-term speculative buy. 

Here’s what I had to say about Lucid in December: “That said, it sits in an enviable position with strong pre-orders worth $1.7 billion, a factory in Arizona that can produce up to 34,000 vehicles a year, and $4.8 billion in cash on its balance sheet.”

The one thing I didn’t say in my article is that Lucid has the best range and charging performance in the EV industry. That’s important given past concerns from consumers regarding EV range.

As Kelley Blue Book stated in November 2021, fears about range are fading. But until they do, Lucid has you covered due to the superior range and charging speed; therefore, many affluent consumers will likely go for the Lucid Air Dream Edition R, which has a range of 520 miles, 100 miles better than its nearest competitor. 

With a base price of $170,000, Lucid only has to sell 5,882 of the Edition R to get to $1 billion in sales. That’s less than 1% of the vehicles Tesla delivers in a year.

For this reason, I can see $57 in 2022.    

On the date of publication, Will Ashworth 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 InvestorPlace.com Publishing Guidelines.

Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. 


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