Lucid Is A Penny Stock

Small EV companies are likely going to be victims of a slow-growing EV market and powerful competition. None faces these more than Lucid (NASDAQ: LCID). Investor confidence shows it. The stock traded for $57 in late May 2021. It trades for $2.23 today, which makes it a penny stock.

The low stock price also suggests a belief that the company cannot recover from three difficult years.

Lucid produces expensive cars during a period when the theory suggests that EV adoption will occur when the MSRP drops below $25,000. Lucid’s are, by any measure, at the high end of the U.S. car price range. The base model Air Pure starts at $67,000, and the Grand Pure price starts at $111,000. At those levels, it competes with EV models from BMW, Mercedes, Audi, and Lexus. Each of these has a dealer network and a vast marketing budget. (Lucid does have an advantage, which is that most of its manufacturing is in the United States, which means it only has modest tariff problems.)

Even at low prices, the adoption of EVs has been hindered by a lack of public charging stations, slow charging times, limited range, brake wear, and challenges associated with cold-weather charging.

Lucid’s other problem is survival. To start, its sales are minuscule. It produced 2,212 cars in the first quarter and delivered 3,109. In the most recently reported quarter, Lucid had revenue of $243 million and a loss from operations of $733,000. It is highly exposed to any downturn in the economy. (This raises the related problem of who will repair Lucid vehicles if the company disappears.)

Lucid has a large analyst base for a company of its size. Fifteen analysts follow it. Most are pessimists about the automaker. Eleven rates it an underperform, sell, or hold. The consensus price target is only $2.53, which is a few cents above today’s price.

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