July 23, 2024
Investment

The Worst Investment Idea for 2024? Buying Lucid Stock.


LCID stock - The Worst Investment Idea for 2024? Buying Lucid Stock.

Source: Tada Images / Shutterstock

As it turns out, investing in electric vehicle manufacturer Lucid Group (NASDAQ:LCID) wasn’t a great idea in 2023. Will next year be any better? Don’t count on a swift recovery in LCID stock, as recent news doesn’t bode well for Lucid Group.

It’s not difficult to see why some investors have completely given up on Lucid stock. For one thing, Lucid Group is “two to four years away” from significantly ramping up its production volume, according to Stifel analyst Stephen Gengaro.

Furthermore, citing soft demand for Lucid Group’s vehicles, Needham analyst Chris Pearce lowered his rating on LCID stock from “Buy” to “Hold.” Moreover, these aren’t the only red flags that Lucid’s investors have to contend with. In the future, into the new year, it’s very likely to be a rough road ahead for Lucid Group and its shareholders.

Fancy Cars Won’t Be Enough to Save LCID Stock

Don’t get the wrong idea here. I don’t hate Lucid Group as a company, and I’m glad to acknowledge the quality of Lucid’s EVs. There’s no denying the significance of Car and Driver selecting the Lucid Air Pure as part of its 10 Best List for 2024.

However, fancy vehicles weren’t enough to rescue Lucid stock in 2023. Looking ahead, Lucid Group’s vehicles are not guaranteed to be a strong seller in the coming year. Remember, the Lucid Air Pure RWD has a starting price of $77,400. This means the actual purchase price for customers will almost certainly be higher than that.

In other words, Lucid Group’s EVs are powerful and luxurious but also unaffordable for many Americans. Also, it’s a bad sign that Lucid lowered its 2023 vehicle-production forecast to 8,000 to 8,500 vehicles. Previously, the automaker had guided for “more than 10,000” units to be produced.

The company must provide a much more encouraging EV production estimate for 2024. Hopefully, Lucid Group won’t end up downward-revising that estimate later.

Things Go From Bad to Worse for Lucid Group

Even after a less-than-stellar year for Lucid stock, the final months of 2023 saw the situation deteriorate even further for Lucid Group. First, Sherry House resigned after over two years as Lucid Group’s chief financial officer (CFO).

LCID stock fell 9% soon after the market caught wind of House’s resignation. Yet, that wasn’t the only potential sign of trouble. Lucid Group’s shareholders also discovered in December that the company has been removed from the Nasdaq 100 index. That’s a prestigious stock-market index, so it’s understandable if Lucid’s investors are concerned about this development.

Finally, there’s a piece of seemingly positive news that isn’t very impressive upon further reflection. As you may recall, Lucid Group announced the opening of an EV production facility in Saudi Arabia in September.

Fast-forward to December and Lucid Group bragged that it had “assembled almost 800 cars in its Saudi Arabian factory since its opening.” That’s a start, but Lucid shouldn’t boast about its Saudi-plant EV production numbers until they’re in the thousands.

Investors might also wonder whether Lucid uses a cost-efficient process to produce its vehicles. According to Faisal Sultan, Lucid Group’s global vice-president, “The car is fully built in Arizona… then it gets de-assembled… then the car gets shipped here [in Saudi Arabis] as a kit, and that kit is then put back together.” That’s a complicated way to get EVs built, and it might hinder Lucid’s ability to turn a profit on these vehicles.

No Need to Veer Into a Ditch With Lucid Stock

Lucid stock started off in 2023 in the fast lane but then steered into a ditch by December. Even if Lucid Group shares look cheap, prospective investors need to consider the growing collection of red flags.     

Losing a top executive and getting dropped from the Nasdaq 100 index are signs that Lucid Group may be on a problematic path. Only time will tell whether Lucid’s shareholders lose money in the coming year, but the prospects don’t look good. Therefore, it’s not unreasonable to consider buying LCID stock, which is quite possibly the worst investment idea of 2024.

On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.



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