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3 Reasons Why Lucid Stock Earns an ‘F’ Despite Saudi Arabia’s $1B Stake

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Apparently, there’s a fund with a large financial stake in electric vehicle manufacturer Lucid Group (NASDAQ:LCID) stock. Sensible investors should consider the bigger picture when assessing a company. Despite having a financial backer, LCID stock receives an “F” grade.

Slowing EV demand means that manufacturers like Lucid Group are under tremendous pressure. Investors must be cautious and selective. One headline might not impact Lucid stock in the long term.

A ‘So, What?’ Moment for Lucid Group

Here’s a headline that briefly grabbed the market’s attention. Reportedly, Ayar Third Investment Company, an affiliate of Saudi Arabia’s Public Investment Fund, agreed to purchase $1 billion worth of Lucid Group preferred stock shares.

Evidently, the PIF really likes Lucid Group. According to Reuters, Saudi Arabia’s PIF holds a 60% stake in Lucid.

First of all, it’s a potentially precarious situation for one entity to control a 60% stake in a company. Just imagine what could happen to LCID stock if the PIF decides to divest some or all of its Lucid Group shares.

Second, this isn’t the first headline involving the PIF taking a large stake in Lucid Group. Last year, Lucid Group disclosed that the same PIF agreed to buy 265,693,703 Lucid shares for approximately $1.8 billion.

So, let’s see what’s happened since that mid-2023 announcement. LCID stock went from $7.76 on May 31 of that year to around $3 recently.

Lucid Group’s Problems Haven’t Miraculously Vanished

Clearly, history shows that the PIF taking a sizable share position in Lucid Group doesn’t mean the stock price will go up. Besides, Lucid still has problems that won’t just magically go away:

  • Lucid only produced 8,428 vehicles in 2023. Bear in mind, the company previously guided for “more than 10,000” produced vehicles. For this year, Lucid only expects to produce “approximately 9,000” vehicles.
  • The company’s vehicles are unaffordable for many Americans, even after price reductions. Specifically, the Lucid Air Pure is “now priced from $69,900; Air Touring from $77,900;” and “Air Grand Touring from $109,900.”
  • Lucid Group delivered a mere 6,001 vehicles in all of 2023. Is it possible that making often-unaffordable EVs isn’t an ideal strategy?
  • Lucid is unprofitable, and the automaker’s net earnings loss is widening. In particular, Lucid Group reported an earnings loss of $654 million in the fourth quarter of 2023, versus a loss of $473 million in the year-earlier quarter.
  • Sure, the PIF recently agreed to buy $1 billion worth of Lucid Group preferred shares. However, CEO Peter Rawlinson acknowledged that Lucid is burning around $1 billion in cash per quarter.

We saved the best (or perhaps worst) bullet point for last. Lucid Group isn’t burning through $1 billion per year; it’s burning through $1 billion per quarter.

Hence, the recent $1 billion share-purchase agreement from the PIF isn’t much of a lifeline for Lucid.

LCID Stock: Yawn and Move On

Today, we assessed the PIF’s new purchase of Lucid Group preferred shares as a “big yawn” moment. Prospective investors should read the news and be aware of what’s going on with Lucid, but don’t just take the company’s news releases at face value.

Instead, decide for yourself what will actually move the needle and what won’t. Of course, Lucid Group will try to spin the PIF’s investments as terrific news for the company. Yet, Lucid still has multiple, alarming issues to deal with.

Consequently, we’re giving LCID stock an “F” grade, and we’re not recommending it for an investment .

On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.

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