May Shopping for Lucid Group Inventory In the present day Set You Up for Life?

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Lucid makes a really small quantity of automobiles relative to different automakers.
It is laborious to disregard that the corporate loses billions yearly.
Different key gamers are competing in the identical house.
10 shares we like higher than Lucid Group ›

No matter its standing as an electrical automobile (EV) participant, Lucid Group (NASDAQ: LCID) continues to be only a automobile inventory, and automobile shares don’t make buyers fortunes. Tesla has been a uncommon exception, however we’re speaking in regards to the rarest of the uncommon.

Competitors is one factor maintaining EV makers like Lucid from rocketing shareholders to unbelievable wealth. Along with Tesla, conventional automakers like Basic Motors and Ford additionally make electrical autos, which, from private expertise, I can say are fairly good. The pure EV gamers haven’t any kind of monopoly on that house of the enterprise, and it appears not possible that the extra established gamers inside autos are going to let up the strain.

Lucid’s annual gross sales are undoubtedly rising, growing from a mere $4 million in 2020 to over $807 million in 2024. The issue is that the enterprise is dropping billions yearly, which explains why the corporate’s share depend continues to climb because it raises capital to cowl operations by issuing shares. Complete shares excellent elevated practically 32% yr over yr within the first quarter of 2025, all whereas Lucid reported a internet lack of $366 million, excluding accretion of redeemable convertible most well-liked inventory, which took losses to $731 million.

A person standing next to a vehicle parked near the ocean. — Picture supply: Lucid Group.

To me, the euphoria has worn off this inventory, as it’s down over 70% within the final 5 years. This is not to say that it makes a nasty product. Fairly the alternative. Automobile and Driver provides the 2025 Lucid Air a five-star score. The issue is the price of increase a automobile firm from scratch and competing in opposition to the established giants within the trade which can be all making their very own electrical automobiles together with inner combustion engine autos.

Lucid’s automobile manufacturing got here in at 9,024 autos in 2024, which is minuscule in comparison with opponents like Basic Motors, which bought effectively over 2 million autos. Steerage requires round 20,000 autos to be produced in 2025, which continues to be fairly minuscule relative to the broader automobile market.

I have been watching auto shares for a very long time, and I do not see the power of the sector when it comes to funding. The exception is, after all, Tesla, however its operations span throughout extra than simply automobiles, and I feel its inventory may even come again to earth sooner or later.

Individuals can solely purchase so many automobiles. Whether or not it is EVs or common combustion engines, individuals aren’t going to purchase extra automobiles than wanted. With an growing variety of choices inside EVs, Lucid does not appear to notably stand out from the pack, apart from the truth that it focuses on luxurious autos. However opponents like Cadillac, Mercedes, and Volvo are all doing the identical factor, and so they have extra of the infrastructure required to supply at scale.

Most automobile shares commerce at round 10 to 13 instances earnings. I feel these electrical start-ups will find yourself with related valuations as soon as the fervor has worn off. Mercedes operates within the luxurious house and has delivered features of over 56% during the last 5 years. That pales compared to the S&P 500 return of 94% over that very same timeframe, and I see little or no cause for automobile shares to start out outperforming the market. It is a capital-intensive enterprise and really prone to weak financial situations. Again to my headline, I do not assume Lucid inventory will set anybody up for all times, however it might make for an OK funding if the corporate can proceed to scale.

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David Butler has no place in any of the shares talked about. The Motley Idiot has positions in and recommends Tesla. The Motley Idiot recommends Basic Motors. The Motley Idiot has a disclosure coverage.

May Shopping for Lucid Group Inventory In the present day Set You Up for Life? was initially printed by The Motley Idiot