Estimated read time: 3 minutes
Publication date: 7th Dec 2021 14:28 GMT+1
Shares of electric vehicle company Lucid Group (NASDAQ: LCID) are down more than 5% on Monday, December 6, 2021. Lucid disclosed it received a subpoena from the SEC or Securities and Exchange Commission to produce certain documents relating to an investigation by the regulatory body.
A report from TheFly states, “Although there is no assurance as to the scope or outcome of this matter, the investigation appears to concern the business combination between the company and Atieva, Inc. and certain projections and statements.”
It’s quite possible that the ongoing pullback might be temporary offering investors an opportunity to buy the dip in a company with enticing growth prospects.
The bull case for LCID stock
Lucid Group has been on an absolute tear this year and has surged over 300%, valuing the stock at a market cap of $77.8 billion. The company is a technology and automotive entity that develops electric vehicles. It announced the first group of Dream Edition car deliveries on October 30, shortly after Lucid Group started production at the Arizona factory in September. The facility is in fact the first dedicated EV manufacturing hub in North America.
The Dream Edition models are equipped with a special 118 kWh version of Lucid’s long-range battery pack, featuring 22 modules totaling 6,600 cylindrical cells. It has a certified range of 520 miles on a single charge which is the longest for any electric vehicle.
Lucid Group plans to deliver 520 Dream Editions followed by deliveries of the Air Grand Touring versions. As of November 15, 2021, it has over 17,000 reservations and an order book of $1.3 billion. The Advanced Manufacturing Plant in Arizona has a production capacity of up to 34,000 units each year.
Lucid Group ended Q3 of 2021 with a cash balance of $4.4 billion as it continues to invest in the expansion of manufacturing capabilities.
What next for Lucid Group investors?
Lucid Group expects sales to touch $2 billion by end of 2022. Further, it plans to expand its portfolio and enter the luxury SUV space by end of 2023. This might drive sales to $10 billion by 2024.
In addition to automobiles, Lucid Group will also leverage its proprietary engineering technology for applications in energy storage systems. Expansion into other international markets will also be a key revenue driver for Lucid Group in the upcoming decade.
The company’s CEO, Peter Rawlinson explained, “We see significant demand for the award-winning Lucid Air, with accelerating reservations as we ramp production at our factory in Arizona. We remain confident in our ability to achieve 20,000 units in 2022.”
He added, “This target is not without risk given ongoing challenges facing the automotive industry, with global disruptions to supply chains and logistics. We are taking steps to mitigate these challenges, however, and look forward to the launch of the Grand Touring, Touring, and Pure versions of Lucid Air through 2022.”
The final verdict
Lucid Group is a company part of a rapidly expanding addressable market providing it with enough room to grow revenue at an enviable pace in the upcoming decade. Despite its strong balance sheet, the company will have to raise capital to fund its expansion plans going forward.
This in turn will dilute shareholder wealth significantly which might drive LCID stock lower.
Further, Lucid Group also remains vulnerable in a market that is extremely overvalued at current levels. Investors should be ready for freefall in LCID stock if it misses earnings or revenue estimates in the upcoming quarters.
Disclaimer: The writer is an experienced financial consultant who writes for Finscreener.org. The observations he makes are his own and are not intended as investment or trading advice.
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