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Lucid Group’s first stock coverage show challenges in EV industry

Lucid Group is yet to deliver its first vehicle, Air Dream Edition sedan later this year. CFRA analyst Garrett Nelson gave the company’s first stock coverage after its merger. Lucid Motors merged with Churchhill Capital Corp. IV and became Lucid Motors.

Image credits- Investors Business Daily

Nelson set a target of $25 as Lucid Group’s 12-month price target. On 10th September the stock traded at $20.20 in New York time. Furthermore, Nelson wrote,  “Our adjusted EPS are ($1.65) for 2021, ($1.10) for 2022, ($0.70) for 2023, and ($0.25) for 2024.”

Lucid Air Dream Edition sedan is a sports vehicle with a luxurious interior and sleek design, thus having a high price tag. But the vehicle is known even before its deliveries started because the specifications show that every penny is worth spending on. Specifications like high range ratings, with the incredible white-knuckle performance of its adaptive powertrain, were highlighted recently by MotorTrend. As stated by Nelson,  “With first-class specs on its forthcoming luxury EV models, strong balance sheet and management team, and a brand new factory in Arizona, LCID appears to check all the boxes of an industry newcomer with staying power,”

Challenges lying ahead

However, CFRA analysts do not think that the journey for Lucid Motors will be smooth. Especially when the industry is struggling with issues like semi-conductor shortage. Being a newly formed company that is yet to set its foot in the industry. Now Lucid cars have to compete with both newly formed EV makers and traditional automakers shifting towards EVs. Nelsons adds, “Despite these competitive advantages, investors might encounter some speed bumps, as LCID’s closest competitor (Tesla) has established a formidable competitive moat,”

The EV sector of Lucid Motors already had its bumps through supply chain shortages. Every automaker is struggling to make a strong 2021 by battling the shortages. As the chip supply is going to decrease, the demand is increased more than ever. Which is mentioned as, “Chip shortages present a near-term operational risk,”

In the end, there is impressive demand for Lucid Air Dream Sedan. It is known that a total of 11,000 units payments have been done by the month of July. The company is set to launch its first production processes in  Arizona facility at Casa Grande. Interestingly the CEO and CTO Peter Rawlinson are not decided on increasing their production target to 20,000 units in 2022. Considering the unpredictable nature of automotive production, it is evident that the production may not go as planned. Later this month, Lucid is going to hold a production preview event later this month.

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