Lucid Group (NASDAQ:LCID) produced its first-quarter earnings results on May 5. Let’s cut to the chase here. LCID stock is still wildly overvalued and is likely to keep falling, just as I previously predicted.
The bottom line is the company produced and delivered just 360 electric vehicles (EV) during Q1. But Lucid still says that it will deliver between 12,000 to 14,000 EVs this year.
Moreover, Lucid is now increasing its prices, even though its Lucid Air sedans are definitely at the high end of the luxury EV sedan business costing north of $150K. That could dampen demand for its cars further.
Lucid faces global supply chain and logistics challenges that are hampering its ability to manufacture EVs. But the company still says it will deliver 12K to 14K EVs by the end of 2022. The problem is that no other industry is seeing any relaxing of their chip, logistics, and shipping issues. In fact, Amazon (NASDAQ:AMZN) just reported a massive free cash flow (FCF) loss of over $29 billion for Q1 mainly due to these issues.
At $16.84 per share with a $28.17 billion market value as of May 9, LCID stock seems way too high. For example, analysts forecast just $1.3 billion in sales this year and $3.39 billion next year. That puts it on a price-to-sales (P/S) multiple of 23.3 times this year’s sales and 8.9 times next year.
The problem is this assumes Lucid ramps up to at least 10,000 EVs delivered this year. For example, if we multiply $150K by 10,000 EVs, revenue works out to $1.5 billion. The market seems to be assuming just 8,125 will be delivered (i.e., $1.3b/$160K=8,125). Even if we lower the revenue received to $150K, the market’s assumption rises to just 8,667 EVs.
Where This Leaves Investors In LCID Stock
This calls into question how realistic the company is by maintaining their 12K to 14K EV deliveries. In fact, Morgan Stanley’s Adam Jonas says this is too high. He projects just 9,900 EVs this year at most and that might be “on the aggressive side.” That puts its high 23 times P/S multiple in question.
By comparison, Tesla (NASDAQ:TSLA) is forecast to deliver over 1.4 million EVs this year, but its P/S multiple is just 10.3x this year and 7.8x next year’s forecast sales. This is based on its $897 billion market cap and forecasts of $87 billion in sales this year and $115 billion next year.
In other words, just to get to Tesla’s P/S metrics, LCID stock needs to fall by at least 56% (i.e., 10.3x/23.3x-1) based on its 2022 P/S metric comps. Using 2023 comps, the price should fall by 12.4% next year (i.e., 7.8x/8.9x-1). The average of these two is -34.2%.
In other words, expect to see LCID stock fall by at least one-third. When it becomes clear that the company won’t meet its 12K-14K delivery targets, the stock will suddenly adjust. This is what happened when it lowered its original 20K 2022 delivery targets earlier this year.
On the date of publication, Mark Hake did not hold (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.
