Anything is possible on Wall Street. For all we know, Lucid Group (NASDAQ:LCID) stock might stage an improbable turnaround in 2024. LCID stock is only rated “D” due to lack of evidence supporting an unlikely scenario. Without the help of some unanticipated catalyst this year, Lucid just won’t be a high-confidence pick.
Please don’t get the wrong idea. The purpose here isn’t to denounce Lucid Group as a company. We’re just trying to help investors avoid a potentially costly mistake. Lucid stock logged 17 consecutive losing trading sessions recently. It just goes to show that, unless a stock is at zero, it can always go lower when the company is having problems.
LCID Stock Keeps Underperforming
Consider this: If you had just bought and held the S&P 500 last year, you would have gained around 24% plus dividends. Or, you could have taken your chances with Lucid stock, which slid from $6 and change to slightly more than $4 in 2023.
That year, Lucid Group disappointingly lowered its full-year EV-production guidance from 10,000 units to a range of 8,000 to 8,500 vehicles. Lucid Group Chief Financial Officer Sherry House resigned after more than two years in the role.
In case that wasn’t bad enough, Lucid Group announced its removal from the Nasdaq 100 index. Moreover, 2023 was the year that Lucid announced an 18% workforce reduction, amounting to around 1,300 employees losing their jobs.
The new year, unfortunately, isn’t starting off auspiciously for Lucid Group. Reportedly, the National Labor Relations Board (NLRB) is alleging that Lucid unlawfully terminated employees for attempting to unionize. Irrespective of how you might feel about unions, you must admit it’s not a good look if the media is reporting on Lucid’s alleged illegal activities.
Could Lucid’s Cash Runway Run Out?
It seems like there’s just one problem after another for Lucid Group. Not long ago, Stifel analyst Stephen Gengaro argued that Lucid is “two to four years away” from significantly ramping up its production volume. Meanwhile, some EV manufacturers and legacy automakers are rolling new vehicles out of their production plants at high volumes.
One strategist provided more reasons (in case you need them) to steer clear of Lucid stock. Robert Schein, chief investment officer at Blanke Schein Wealth Management, waved a red flag regarding Lucid Group’s “cash burn rate.”
Recently, Schein warned that Lucid Group “could be out of cash within a year this time next year.” Granted, some LCID stock bulls might argue that Lucid will have a capital infusion from the government of Saudi Arabia.
That’s not necessarily a long capital runway, though. “Ultimately, the Saudi government is their backer at $1.8 billion earlier this year, but how long does that last?” Schein pointedly asked.
Besides, Lucid Group is a startup entrant in a fiercely competitive field with much more famous automakers. In other words, as Schein put it, Lucid is “last to the party” in the EV industry.
Use Common Sense and Avoid Lucid Stock
Common sense should tell you that Lucid Group’s problems won’t just disappear because it’s a new year. Unless some unanticipated positive catalyst comes along, there’s no compelling reason to own Lucid stock in 2024.
We’ve tried to warn you about Lucid Group by pointing out the company’s multiple problems and concerns. This doesn’t mean that Lucid is completely hopeless. Hopefully, the company’s cash runway will last more than a year.
But always remember, hoping to avert disaster isn’t a viable investment strategy. Consequently, we’re not currently prepared to recommend LCID stock, and we’re assigning it a grade of “D.”
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.
