The market is anticipating a strong deliveries report from Lucid Group (NASDAQ:LCID). Lucid stock shot 7% higher on Wednesday as investors bet the luxury electric vehicle maker will have better-than-expected numbers.
Even if Lucid is able to make good on that hope, investors should remain wary. We won’t have any financials to go along with the report, so it should be assumed more deliveries may just mean the high-end EV stock is losing more money on every vehicle sold.
As we saw last quarter, Lucid had to slash prices on its cars to move them off dealer lots.
It still has a huge backlog of unsold vehicles, meaning the EV company is likely sharply cutting prices on them to clear out the lots so it can bring its newest vehicles to the showroom floor. That will only mean more losses for Lucid stock.
More Is Not Better
Lucid Group delivered 1,967 EVs, boosting first-quarter revenue to $172 million, a 15% increase. Lucid Group delivered 1,967 EVs, resulting in a 15% increase in first-quarter revenue to $172 million.
It was the first time it delivered more vehicles than produced, but it also made 25% fewer EVs than it did one year ago.
As Lucid’s cheapest car starts at just under $70,000, that is almost 20% more than the average price of an electric car. But the EV company had been cutting prices, which likely accounts for the higher deliveries.
As it still had a huge backlog of around 5,000 vehicles sitting on lots, dealers wanted to sell those cars first before taking more.
It stands to reason Lucid would keep cutting prices to get them moving. And that means it will earn less per vehicle widening losses further. Selling more cars at steeper losses does not make a viable investment and investors should steer clear of Lucid stock.
The EV Market Is Still Sliding
The June delivery report from EV industry bellwether Tesla was not good. Although deliveries fell less than expected, the EV leader still saw the number drop. It delivered 443,956 Teslas in the second quarter, almost 5% less than the year-ago number.
That it was better than the decline Wall Street was expecting doesn’t change the fact the market continues to slow. The Model 3 and Model Y vehicles, Tesla’s biggest sellers representing 95% of deliveries, have a base price of $39,000 and $42,000, respectively.
That is at best 40% lower than Lucid’s base price for its cheapest car.
You can’t read anything into Lucid’s deliveries from Tesla’s performance.
A Big Loss-Generating Machine
Despite Lucid Group moving more EVs in the first quarter and boosting revenue, it still produced operating losses of $729 million.
That’s only slightly better than the $772 million is lost in the year-ago period and barely budged from the $737 million it lost in the fourth quarter.
It is understandable current shareholders are hanging their hats on any possible good news coming out of Lucid factories.
That doesn’t mean you should follow them. Lucid stock is damaged goods and buying it now, especially after the recent jump in price, will only set your portfolio up for big losses later.
On the date of publication, Rich Duprey 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.
