Shares of Lucid Group (LCID -9.80%) plunged below $3 Monday, and were down by 10% as of 2:30 p.m. ET. A significant analyst downgrade appears to have triggered the sell-off.
Redburn Atlantic analyst Tobias Beith downgraded Lucid stock to sell from neutral, slashing his price target from $3.50 a share to only $1.13 per share. That new target is 63% below the electric vehicle (EV) maker's closing price Friday.
Although Beith believes it won't be easy for Lucid's rivals to "replicate the efficiency" of its electric cars before 2030, the company will require huge amounts of cash to scale up production of the new mid-size platform it expects to launch next year. The analyst expects significantly higher cash outflows, to the tune of billions of dollars, for Lucid between 2025 and 2030.
Lucid's lack of manufacturing scale and its high vehicle costs are the other reasons Beith is bearish about the EV stock.
Lucid will release its fourth-quarter and 2024 numbers after the market close Tuesday. Earlier this year, Lucid said it produced 3,386 vehicles and delivered 3,099 in Q4, up significantly from the third quarter. However, it also reported a huge loss in Q3, primarily because of write-downs and other non-operating charges.
Lucid's growth will depend largely on its Gravity SUV -- the company delivered the first ones to customers in December. Its top line should grow as the Gravity starts contributing meaningfully to sales, but higher losses and a growing cash burn rate remain concerning. The numbers Lucid reports Tuesday and management's outlook for 2025 will be the key drivers of its stock price, in whatever direction it heads.
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