Can the Lucid stock continue to accelerate?

Lucid’s [LCID] stock soared 23.7% last Tuesday after the firm reported more than 17,000 reservations for its Air sedan. That marks another acceleration for a stock that has seen a 458% climb since going public at the start of the year. Friday saw Lucid's stock shift into an even higher gear gaining over 17% to close the week at $55.21.

For Lucid’s stock to continue to gain it will have to meet ambitious production targets for 2022 – a big risk for a company that has only started delivering vehicles. So just how bullish does the long-term outlook appear for the stock?

Can Lucid’s stock maintain the pace?

Lucid’s stock is once again gaining at a phenomenal speed and is approaching the $64.8 high hit on 14 February. The company, which only went public in January, and delivered its first vehicle in October, now has a market capitalization of nearly $80bn. That’s about the same as Detroit royalty Ford [F], which shifted 400,843 vehicles in the third quarter. General Motors’ [GM] market cap sits at $91bn, and beyond that is Tesla’s [TSLA] $1trn market value.

CEO Peter Rawlinson believes Lucid could be the next Tesla as the firm overtakes traditional automakers.

“I think the sky’s the limit in terms of valuation, but it’s all about execution,” Rawlinson told CNBC after Lucid released its first ever public results. “It’s all about scaling volume. And that’s my focus. And I think the share price lookup is a result.”

CFO Sherry House was similarly enthusiastic saying that she felt ‘great about our stock price’ and that Lucid’s growth trajectory was in front of it. House argues that Lucid is more like a technology company that offers an extensible platform than a traditional automobile manufacturer.

Lucid’s plans are nothing short of ambitious. In July Lucid said it was targeting production of 20,000 Air sedans, a target it admitted was not without risk. Tesla only made 1,500 vehicles in its first year of business.

“I think the sky’s the limit in terms of valuation, but it’s all about execution...It’s all about scaling volume. And that’s my focus. And I think the share price lookup is a result"- Lucid CEO Peter Rawlinson, per CNBC

Is the Lucid stock about to skid?

Investors will want to do their due diligence before piling into Lucid’s stock. In a piece titled ‘The valuations of some electric vehicle companies are bonkersville’, CNBCPro’s Fred Imbert pointed to Wall Street chatter suggesting that some of the valuations around EV stocks are out of control.

Morgan Stanley’s Adam Jonas reiterated his Overweight rating, suggesting that the brakes could be about to be put on Lucid’s stock gains.

“At more than $50/share currently, we estimate the company is discounting volume well above management’s long term targets and an EBITDA margin in the area of 20%,” the analyst wrote. Jonas said that Lucid had a long way to go before becoming a success, scaling production was a risky part of any company’s growth and that Lucid faced supply chain problems outside its control. 

Jessica Caldwell, from car review publication Edmunds, told the Financial Times, that Tesla made investors rich and ‘now everyone wants in on the next big thing in the EV space’.

“Unfortunately, a company like Tesla doesn’t come along very often and the valuations placed on Rivian and Lucid are questionable, particularly in comparison to the existing automotive companies,” Caldwell told the FT.

It’s also worth pointing out that after hitting its all-time high mid-February, by the end of the month Lucid’s stock had slumped 30% to trade at just over $26.

“Unfortunately, a company like Tesla doesn’t come along very often and the valuations placed on Rivian and Lucid are questionable, particularly in comparison to the existing automotive companies” - Edmunds' analyst Jessica Caldwell, per Financial Times

Where next?

There’s a lot of hype going on in the EV market right now. Investors looking for the next Tesla are pumping up EV stocks to questionable valuations with both Lucid and Rivian having market caps bigger than VW - aka the world's largest car maker- despite neither having made any meaningful revenue.

In the third quarter Lucid reported a net loss of $524.4m, easily making the $232,000 made in sales - largely from battery sales - seem small beans. That’s not a deal breaker for a company still in growth mode, but with the lofty prices we’re seeing right, any earnings miss could see Lucid’s stock tumble.