Shares of Lucid Group (NASDAQ:LCID) helped brighten a soft Monday session on Wall Street, moving up nearly 3%. Undergirding sentiment for the electric vehicle (EV) startup — which specializes in premium luxury EVs — was the company’s announcement of a friends and family referral program. Designed to bolster demand, LCID stock nevertheless suffers from significant industry headwinds also impacting its peers.
According to the accompanying press release, the EV manufacturer launched the Lucid Referral Program for the U.S. market. Under this directive, current Lucid owners can share a unique referral link to their social network. Should interested parties buy a vehicle from the luxury brand via the link, forward owners will receive points. These points can “accumulate toward the redemption of a variety of branded gear, vehicle accessories, or limited-edition products.”
Further, owners will also be able to redeem their points for so-called Lucid Experiences, which including exclusive tours of Lucid’s headquarters and domestic manufacturing facility. On the other side, new Lucid customers who purchase through the referral link may enjoy one of the below benefits:
- $750 discount on Air Pure
- $1,000 discount on Air Touring
- $1,250 discount on Air Grand Touring
- Sapphire-branded duffel bag upcycled from the same leather featured in the Lucid Air Sapphire, for Sapphire deliveries
Though better than nothing, the “cheapest” Lucid Air Pure EV starts at $77,400. Therefore, the discount comes out to only 1%.
LCID Stock Faces Down Significant Industry Headwinds
Once a promising alternative to EV sector stalwart Tesla (NASDAQ:TSLA), Lucid faces the same troubles as its main rival. Indeed, the whole industry faces significant headwinds that have left participants perplexed. Notably, while LCID stock enjoyed a strong performance on Monday, it’s still down 28% against the January opener.
Even worse, over the past 365 days, shares hemorrhaged over 65% of equity value. Obviously, it’s a much worse performance that TSLA’s less-than-2% return over the same period. Unfortunately, that’s a significant hurdle for LCID stock given that such a return for Tesla is awfully pedestrian.
As Reuters pointed out, higher borrowing costs have negatively impacted EV sales in recent quarters. Also, Tesla unleashed a price war in its bid to dominate market share. It may have seemed like a shrewd move on Tesla’s part as it stymied smaller outfits — such as Lucid — from establishing a viable foothold in the increasingly competitive ecosystem.
However, Tesla’s actions also contributed to the current ugly demand fallout, a domino effect that also took down the mighty brand. Recently, the company’s third-quarter earnings report missed Wall Street’s expectations for gross margin, profit and revenue.
While LCID stock has its supporters, it’s also incurring significant cash burn in the capital-intensive business. Per Gurufocus, free cash flow sits at a loss of $3.75 billion on a trailing-12-month (TTM) basis. During the same period, cash, its equivalents and marketable securities come out to $5.25 billion.
Why It Matters
According to TipRanks, analysts rate LCID stock as a consensus hold. This assessment breaks down as three buys, four holds and three sells. Overall, the average price target lands at $7.15, implying about 61% upside potential.
On the date of publication, Josh Enomoto 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.
