Amongst investors, sentiment for Lucid Group (NASDAQ:LCID) has clearly swung back to bearish. However, among the Wall Street analyst community, opinions on LCID stock differ.
Sure, some sell-side analysts have downgraded the electric vehicle maker’s shares recently. Many other analysts, though, have maintained bullish ratings on the stock, but have reduced their price targets. With this, some investors may be curious whether going against the crowd on LCID is something to consider.
Yet while a plurality of analysts are still making the bull case for Lucid, in my view, it remains much easier to argue the bear case. Mainly, because the issues that sent this once popular EV stock down to single-digit prices in the first place continue to persist.
With this, let’s dive in, and see why following the market’s lead out of this stock could be the better move.
What Analysts are Saying
According to Marketbeat, which tracks sell-side analyst ratings, analyst consensus for Lucid Group stock comes in at “hold.” Out of 9 analyst ratings, 4 rate it a “buy,” 3 rate it a “hold,” and 2 rate it a “sell.”
Analyst price targets for LCID stock average $15.50 per share, or around 101.5% above its current trading price. Interestingly enough, they issued many of the ratings after Lucid’s latest quarterly earnings release. As you may recall, the market reacted negatively to EV maker’s latest results, which fell short of expectations.
Yet despite these discouraging numbers/outlook, last month’s earnings release has only moderately dampened the analyst community’s overall view of the stock.
Analysts like BofA’s John Murphy downgraded LCID (from “buy” to “neutral”) post-earnings, but several other analysts have merely cut their price targets, while maintaining “buy” or equivalent ratings.
Admittedly, it’s not as if these analysts are arbitrarily staying upbeat on Lucid. To some extent, it may be unfair to judge the company’s long-term potential merely on the latest production figures. However, even when considering future potential, it’s a mystery why the sell-side isn’t universally panning this stock.
Two Problems with the LCID Stock Bull Case
Based on the latest changes to analyst ratings on LCID stock, it’s clear that the sell-side believes that this company will ultimately achieve some level of success. While perhaps not on its way to becoming the next EV powerhouse, Lucid may become a profitable niche manufacturer of luxury EVs by the end of the decade.
I have concurred in past articles on LCID that this is a possibility. Still, I am still skeptical about this bull case, for two reasons. First, the design and technological features of the company’s flagship Air luxury EV may impress fans of this stock with, but falling reservation numbers suggest that even these perceived advantages aren’t helping the brand gain traction among luxury EV buyers.
Second, even if the company reverses current demand trends, this may not translate into materially higher prices for LCID. With the company expected to continue burning cash for several years, additional capital infusions appear to be all but certain.
Like I’ve argued previously, this means a heavy amount of shareholder dilution. This will weigh further on the stock and limit its long-term upside potential.
Lucid’s latest earnings did little to shift sell-side sentiment. Yet in the quarters ahead, more of the analysts still bullish on the stock today may drift over to a “wait and see” view on shares, possibly changing their “buy” ratings to “hold” ratings.
Price targets could continue to come down, as it becomes undeniable that Lucid will need to tap into additional outside capital in order to fund its move to large-scale, profitable production.
However, that doesn’t mean shares will only drop once again, in the event analysts shift to an overall bearish stance. In the meantime, macro uncertainties are again putting pressure on the market. Temporary boosters for this stock, such as January’s takeover rumors, have fully faded.
With this, ahead of the next round of big declines, sell LCID stock well before the sell-side changes its tune.