Lucid Group Inc. Faces Near-Term Challenges

Baird analyst, Ben Kallo, recently provided an assessment of Lucid Group Inc.’s current situation. While recognizing the company’s top-notch technology, Kallo acknowledges that there are challenges ahead.

Neutral Rating

Kallo initiated coverage of Lucid’s stock (LCID, +0.35%) with a neutral rating. He believes that before he can take a more positive stance on the company, Lucid needs to show improvement in consumer health and ramp up its production volumes.

Software and Drivetrain Excellence

One area where Lucid excels is in its software and drivetrain. The company has developed these components in-house, enabling industry-leading performance in range, efficiency, charging, and more. Lucid achieves improved performance by layering its software over various power functions.

Temporary Concerns

Although there have been concerns regarding demand and Lucid’s production outpacing deliveries, Kallo sees this as a temporary issue. He expects the gap to narrow over time as consumer health improves, Lucid enters new markets, and the brand gains traction.

Production Challenges

Like other electric vehicle (EV) manufacturers, Lucid could face challenges related to production. Profitably ramping up EV production has proven difficult for several competitors, and it has already presented challenges for Lucid in its short operating history. Component shortages and supply-chain tensions have led to a reduction in vehicle production guidance multiple times. These factors could potentially impact results once again.

Capital Requirements

To execute its strategic growth plan, Lucid will need to raise additional capital. However, doing so may be more challenging in a high cost-of-capital environment.

Price Target and Closing Share Price

Kallo has set a $7 price target for Lucid shares, which closed at $6.30 on Tuesday.

In conclusion, while Lucid Group Inc. possesses impressive technology, it faces a challenging near-term setup. It must overcome production challenges, improve consumer health, and secure additional capital to achieve its growth objectives.

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