Following a tumultuous time in the market, shares of premium luxury electric vehicle manufacturer Lucid (NASDAQ:LCID) gained conspicuously on Thursday. Early next week, the company will deliver its results for the third quarter. More than likely, it’s a must-win showdown as the electric vehicle (EV) upstart desperately needs to demonstrate viability amid broader pressures. Amid fading demand and an aggressive price war, LCID stock needs all the help it can get.
On paper, Lucid should be a stout competitor in the burgeoning EV arena. Backed by Saudi Arabia’s Public Investment Fund (PIF), the vehicles represent an attractive alternative to the Tesla (NASDAQ:TSLA) brand. While Tesla obviously dominates the discussion with its first-mover advantage, its ubiquity in the space now carries some vulnerabilities. For example, other automakers have exposed its dull, minimalist design language.
Unfortunately, aesthetics can only go so far. As Reuters pointed out last month, Lucid revealed a nearly 30% decline in Q3 production. Specifically, the upstart produced 1,550 vehicles in the three months ended September. That’s down from the 2,173 vehicles produced in Q2. Therefore, the company needs to make 4,000 cars to meet the 10,000-unit goal management reiterated in August.
Given the disappointing trend, investors may be anxious about Lucid’s Q3 report, which is scheduled for a Nov. 7 release.
LCID Stock Struggles Amid Broad Headwinds
As if the production count wasn’t bad news enough, Lucid also disclosed only a marginal rise in deliveries despite big discounts. Early last week, the company announced a friends and family referral program, which offers invited prospective customers various cash discounts, depending on the model they choose. Still, such news may only be underscoring the desperate circumstances in which LCID stock finds itself.
“We thought the disclosure was extremely disappointing,” CFRA Research Senior Equity Analyst Garrett Nelson told Reuters regarding the production and delivery news. Fundamentally, the analyst sees “the company facing daunting headwinds for the foreseeable future from a combination of weak demand and ongoing pricing pressures.”
In 2022, Tesla announced significant price cuts, which it has continued into this year. Compounding matters, business publications began reporting that EV inventory at dealerships started piling up. According to a recent CNBC report, this circumstance improved but modestly. In August 2023, the news agency wrote that “it took about twice as long to sell an EV in the U.S. as it did the previous January.”
Further, Tesla itself has become a victim of its own game. In the EV pioneer’s Q3 earnings report, it missed expectations for both revenue and profitability. Therefore, the circumstances don’t look particularly swell for LCID stock.
Why It Matters
Unsurprisingly, given rising concerns in the EV industry, analysts peg LCID stock as a consensus hold. This assessment balances out symmetrically, with three buys, four holds and three sells. Overall, the average price target stands at $6.87, implying approximately 50% 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.
