High Energy Prices Good for Lucid Group Inc

The price of gasoline and diesel continuing to hover near record highs could provide a much-needed catalyst for battered electric vehicle (EV) stocks.

When reviewing the prospects of EV stocks, the key is analyzing long-term fundamentals and ignoring short-term factors. The reality is that the tailwinds for the EV industry continue to be bullish around the world, and they're not going to stop.

That’s why the legacy automakers have been spending tens of billions of dollars on producing EVs, and why pure-play EV companies are beginning to generate significant revenues.

Take the case of Lucid Group Inc (NASDAQ:LCID), a maker of luxury EVs whose base prices range from $87,400 to $179,000. (Source: “Lucid Reports First Quarter 2022 Financial Results,” Lucid Group Inc, May 5, 2022.)

First Quarter Generates Excitement for LCID Stock

Lucid Group Inc was one of the EV companies that lacked revenues but whose shares still traded at extremely high valuations.

Lucid Group stock has pulled back by 70% from its record $64.96 in February 2021 to the point where the stock is beginning to look interesting as the company's revenues begin to ramp up.

Chart courtesy of StockCharts.com

In the first quarter of 2022, Lucid Group Inc generated $57.7 million in revenues after selling 360 vehicles. (Source: Ibid.)

That isn’t many vehicles, but it’s a start and, based on the projections, it will accelerate. Lucid Group disclosed that its order backlog comprised more than 30,000 customer reservations, equating to potential revenue of $2.9 billion.

This is significant if the orders are actually fulfilled.

Lucid Group estimates it's on track to produce 12,000 to 14,000 vehicles this year. Based on the revenue estimate for 30,000 vehicles, this equates to revenues of $1.16 billion to $1.35 billion.

The consensus analyst estimate for the company's 2022 revenue is $1.37 billion, which is close to my calculation. For 2023, the consensus estimate is $3.5 billion. (Source: “Lucid Group, Inc. (LCID,” Yahoo! Finance, last accessed July 15, 2022.)

Based on the company’s own projections, this implies that Lucid Group Inc will make about 36,310 vehicles in 2023.

In its first-quarter report, Lucid Group disclosed that it had entered a deal to sell up to 100,000 vehicles over the next 10 years to the Saudi Arabian government. This translates to about $9.7 billion (nearly $1.0 billion annually) based on the current prices and contract, either of which could change.

My point is that the company's revenues are going much higher, and given that LCID stock has fallen below $20.00, it may be time for contrarian investors to look at it.

Analyst Take

Shares of Lucid Group Inc still have risk. There are no assurances that the company's actual EV production will come close to its estimates, especially given the current supply chain disruptions that have crippled EV stocks.

What makes me somewhat encouraged about the company is its buildup of production. Yes, Lucid Group will face many hurdles, but with $5.4 billion in cash, the company has the funds to build up its capacity. (Source: Yahoo! Finance, op. cit.)

For investors who are patient and willing to wait a few years, Lucid Group stock could turn out to be a big winner in the EV space.