Lucid Isn’t Worth $7 Billion More Than Nio

I’ve been tasked today with writing about Lucid (NASDAQ:LCID) and LCID stock.

Someone is viewing a red Lucid (LCID) Air car on a computer screen while holding a phone that says Lucid
Source: T. Schneider / Shutterstock

I was fumbling for an original storyline when I realized that Lucid was valued at $47.05 billion, about $7 billion more than Nio (NYSE:NIO), one of my favorite electric vehicle stocks. That difference is only slightly more then Nielsen Holdings’ (NYSE:NLSN) entire market capitalization, the smallest company by market cap in the S&P 500.

I don’t know if that’s a knock against Nielsen or Nio, but what I do know is that Lucid’s getting preferential treatment from investors.

Here’s why.

LCID Stock and Valuation Metrics

Because Lucid only has $4.4 million in sales for the trailing 12 months (TTM) ended Sep. 30, 2021, according to S&P Capital IQ, the current price-to-sales ratio is irrelevant. It’s 9,750x if you care to know. That’s hardly value territory. Meanwhile, Nio trades at 7.04x sales.

To make it a fair comparison, we’ll have to use price-to-book (P/B). Lucid currently trades at 12.8x book. Nio’s P/B is 9.86x, 23% less. That’s a little better if you’re a Lucid fan.

In late January, I argued that Lucid was a speculative buy under $40. At the time, it was trading around $37. Three weeks later, it’s trading around $28.6, 22% lower.

Here’s what I said about Lucid on Jan. 24:

As a speculative buyer of Lucid stock – I say speculative because it has little in the way of revenue and lost $1.5 billion through the first nine months of fiscal 2021 – the fact that PIF [Saudi Arabia’s sovereign wealth fund and owner of 63% of its stock] is willing to double down on its bet [to build a Lucid plant in Middle East] should be all you need to buy some shares now before the details are ironed out and released to the general public

And finally: “Once the plans become official, barring PIF changing its mind before 2025 or 2026, LCID stock is likely to move higher regardless of how much money it loses.”

While the thesis still holds water, the fact that Nio is so much further along in its development — Nio had to cut a deal with the Hefei municipal government in April 2020 to obtain $1 billion in financing to keep the lights on — suggests that Lucid is only getting this preferential treatment because it’s U.S.-based, not headquartered in China.

I’m not suggesting investors are pulling the race card. However, it’s hard to understand why Lucid is worth more at this point. And I like the look of the Lucid Air.

What Gives Here?

In December, I said that if I could only own stock between the two, I’d go for Nio because it’s further along in its development. On Dec. 7 I wrote:

If I could only own one stock, at this point, given how much further ahead Nio’s business is compared to Lucid, combined with the fact NIO stock has gotten hammered much more than LCID, I would lean toward the more established company,

That said, if you can afford both, I would buy both at this point, maybe dividing your purchase 60% Nio and 40% Lucid.

Considering Nio’s got TTM revenue of 32.9 billion Chinese Yuan ($5.2 billion) versus $4.4 million for Lucid, I wouldn’t change a thing. However, I might suggest going 70/30 because Nio’s proven it can sell four different models, with a fifth — the ET5 — expected to begin deliveries in September.

Lucid is currently ramping up its first vehicle’s production. It plans to deliver 20,000 in 2022, and while the sales price of its vehicles is much higher than Nio’s, the Chinese company has a big head start.

The big question is whether the company can get anywhere close to its 2023 estimate of 90,000 vehicles produced. Its market cap will be through the roof if it hits that bogey.

Nio Already Has Clear Results And Lucid Doesn’t

But at the end of the day, Lucid isn’t anywhere close to that.

While I like Lucid’s vehicle, Nio has proven it can execute, first in China and now in Norway. That ought to be worth something.

At the very least, their market caps ought to be flipped, with Nio valued at $7 billion more than Lucid, not the other way around.

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 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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