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LCID Stock – An Underrated EV Player

LCID stock

After disappointing Q2 production and delivery numbers, Lucid Group, Inc. (NASDAQ: LCID) stock dropped 12% – ending the stock’s impressive 22% run on the news of its new deal with Aston Martin (LSE: ALM) for the latter to use some of LCID’s technology. Despite announcing underwhelming numbers, the drop in the LCID stock price could be an overreaction as the company’s fortunes could improve significantly when its Saudi Arabia plant starts delivering vehicles next September. Given the significance of this catalyst, the current dip could be an opportunity to go long on the stock ahead of this upcoming catalyst.

LCID Stock News

Production is the root of all of LCID’s problems with the company cutting its production guidance twice in 2022 and once in 2023 so far. As a result, LCID is unable to fulfill its reservations and the reservation waiting period is extremely long. In this way, demand for LCID’s vehicles is declining as consumers are heading to other EV manufacturers that have less waiting period for deliveries. 

Capital Raise

Looking to improve its production capabilities, LCID recently announced a $3 billion offering where 173.5 million shares will be sold in a public offering for $1.2 billion, and 256.6 million shares will be sold to the company’s majority shareholder the PIF for $1.8 billion. Although this dilution will significantly dilute current shareholders, it might be beneficial for LCID’s long-term prospects since it would help the company ramp up production to meet demand for its vehicles.

PIF Backing

At the same time, this capital raise further shows the PIF’s commitment to helping LCID grow since it is not the first time the PIF provided help to the EV startup. In late 2022, the PIF contributed $915 million in a $1.5 billion capital raise to boost LCID’s cash balance. Moreover, the PIF provided LCID with a 100 thousand purchase order from the Saudi government in addition to facilitating a new facility in Saudi Arabia that would increase production by 150 thousand vehicles.

Through this recent $3 billion offering, LCID would boost its already solid cash balance of $900 million along with $2 billion in short-term investments according to its latest Q1 report. Since these funds would be integral for LCID to scale its production, the sell-off on the offering announcement may be an overreaction by the market – potentially making this current dip an opportunity to add LCID stock.

Another TSLA Story?

It is worth noting that all EV startups have to dilute at some point to raise the capital required to scale up production. One of the most notable examples of an EV startup diluting is the EV giant Tesla, Inc. (NASDAQ: TSLA) which has diluted 13 times to reach its current position as an industry leader. When TSLA went public in 2010, the company had 110 million shares outstanding – a number which increased significantly to 3.1 billion currently. 

During TSLA’s long journey, TSLA stock plunged several times on dilution news, yet holding TSLA stock at the time has proven to be a profitable decision as TSLA is now the largest EV manufacturer in the world. LCID could be in a similar position currently since its main issue is production, and since this problem could be solved with the recent offering, LCID stock could be a bargain at the current PPS for long-term investors.

*Updated June 26th, 2023

PIF Comes To The Rescue Again

Throughout the LCID production saga, the PIF has been by LCID’s side constantly aiding in its development by providing deals, Middle Eastern access, and funds. That said, the most recent example of this could be the recent LCID and Aston Martin partnership. The PIF’s position as Aston Martin’s second-largest shareholder and LCID’s majority shareholder might have allowed it to broker such a deal between both companies.

According to this partnership, LCID will gain a 3.7% stake in Aston Martin in addition to $450 million in phased cash payments. In exchange, LCID will provide Aston Martin with access to LCID’s leading electric powertrain technology to power Aston Martin’s battery electric vehicles, as well as technical support from LCID in integrating its technology into Aston Martin’s new EV platform and the supply of LCID components.

In this way, LCID gains a significant asset with the ownership stake in Aston Martin and a new revenue stream from the contracts it will receive from Aston Martin. At the same time, Aston Martin will be one step closer to producing its first EV in 2025. Based on this, the PIF proves once again its commitment to LCID which might make the sharp dip on the latest offering an overreaction by investors. Having said that, this deal has another striking feature that could cause the stock to soar. Its timing.

The $1.8 billion private placement LCID announced with the PIF is expected to close on June 26 which could have seen the stock witness a post-offering pump given that LCID is trading at an all-time low. By announcing this deal, LCID stock is poised to regain investors’ attention which could allow the stock to start rebounding to its pre-offering levels with the expected buying pressure. In light of this, adding LCID at its all-time low could prove to be profitable for investors.

*Updated July 13th, 2023

LCID’s Production & Deliveries

LCID announced that it produced 2,173 vehicles, a decline of 6% sequentially, which means LCID has produced 4,487 vehicles so far in 2023. While the production number may seem low, it is still in line with LCID’s forecast of 10,000 in 2023. That said, LCID has missed on its target to increase its deliveries sequentially since it delivered 1,404 vehicles down from the 1,406 it delivered in Q1.

The Saudi Arabia Plant

Nevertheless, the underwhelming performance regarding production and deliveries may end soon since the first vehicle assembled in the Saudi Arabia plant is expected to roll out in September 2023. The new assembly line has the potential to improve LCID’s production and deliveries for the rest of the year and the coming years which in turn will increase its revenues and improve its fortunes substantially. 

Furthermore, the plant will start full production in 2025 according to LCID, and is expected to produce 155,000 vehicles annually and export more than 130,000 vehicles to countries in the Middle East region. With this, LCID will be one of the first EV manufacturers to enter the Middle Eastern EV market which is expected to reach $7.65 billion by 2026 according to a report by Mordor Intelligence, allowing it to build brand loyalty and set regional industry standards.

Q4 Outlook

Over the past 4 quarters, LCID has an average production of 2566 vehicles per quarter and average deliveries of 1535 vehicles from its Arizona plant. At the same time, LCID delivers 60.45% on average of its quarterly production.

QuarterProductionDeliveriesDeliveries % from Production
Q3 222,282 1,39861.2%
Q4 223,4931,93255.3%
Q1 232,3141,40660.7%
Q2 232,1731,40464.6%

Assuming that the Saudi plant will start operating at a capacity of 2.5%, 5%, and 7.5%, we can have 3 scenarios. The first scenario would be the plant operating at 2.5% capacity which would see LCID producing 969 vehicles in the Saudi plant starting Q4 2023. In that case, LCID would be able to produce 3535 vehicles in Q4 by adding the 969 expected to be produced at the Saudi plant to the average production in the Arizona plant of 2566 vehicles. In this way, the company would be able to increase its production YoY by only 1.2%. 

As for deliveries, assuming that the company delivers 60.45% of its production, LCID would deliver 586 vehicles produced in its Saudi plant which would translate to total deliveries of 2121 vehicles – representing a 9.7% increase in deliveries YoY. Based on this scenario, the LCID stock price could continue dropping to new lows since the company’s attempts to scale production would be deemed as a failure.

CapacityProduction Per YearDeliveries Per YearQ4 ProductionQ4 Deliveries

In the second scenario, the Saudi plant would be operating at a capacity of 5% which means that the plant would be producing 1938 vehicles per quarter starting Q4 2023. Adding this to the company’s average production from its Arizona plant means that LCID would have total production of 4504 in Q4 – a 28.9% increase YoY. 

Meanwhile, deliveries from the Saudi plant would come at 1172 vehicles based on the company’s delivery rate from production which would bring the company’s total deliveries to 2707 vehicles – a 40.1% increase YoY. According to this scenario, LCID’s revenues would increase by nearly 40% YoY in Q4 due to the increase in deliveries which would signal the success of the company’s plans to scale production. In this way, the LCID stock price may increase significantly from current levels as investors would regain their confidence in the company’s long-term prospects.

CapacityProduction Per YearDeliveries Per YearQ4 ProductionQ4 Deliveries

As for the third scenario, we assume that the Saudi plant would operate at a 7.5% capacity which translates to the production of 2907 vehicles and the delivery of 1757 vehicles in Q4 2023. Based on this, LCID’s total production and deliveries will increase to 5473 and 3292 vehicles – representing 56.6% and 70.3% YoY increases respectively. This would be an extremely bullish scenario for the company as scaling production would be easier for the company in the long term as the Saudi plant is expected to operate at full capacity in 2025.

CapacityProduction Per YearDeliveries Per YearQ4 ProductionQ4 Deliveries

The most likely scenario to occur would be the first one since LCID has not revised its 10 thousand vehicle production target for the year. This would be devastating for shareholders as the company may resort to additional capital raises to fund its operations until it can scale production successfully. For this reason, investors may be better off staying on the sidelines until the company’s Q2 earnings in case it raises its production guidance for the year.

Media Sentiment

@FinJourney is bullish on LCID’s price action post the recent sharp drop.

@BenBSP believes LCID stock will climb up again after its dip.

Technical Analysis

LCID stock chart

After it successfully tested the $7.11 support, LCID stock entered a neutral trend with the stock trading in a sideways channel between $7.11 and $7.98. Looking at the indicators, the stock is trading below the 50, and 21 MAs which is a bearish indication although it remains above the 200 MA which is a bullish indication. Meanwhile, the  RSI is neutral at 37 and the MACD is approaching a bullish crossover.

As for the fundamentals, LCID stock has witnessed a catalyst after the announcement of its Q2 production and deliveries update. LCID’s Q2 earnings on August 7 and the start of the assembly process in the Saudi Arabia plant will be future catalysts for LCID stock. With the stock trading near support, investors could find the current PPS a good entry point ahead of deliveries starting from the Saudi plant.

LCID Stock Forecast

While LCID had disappointing Q2 production and deliveries, it is still on track to achieve its guidance for the year, especially since the Saudi plant will start the assembly process in September which will increase LCID’s production and deliveries. Furthermore, LCID has started using its vehicle powertrain and battery systems technology to make more revenue with the new deal with Aston Martin. With the backing of the PIF, LCID can dominate the Middle Eastern market which makes LCID stock one worth keeping an eye on.

If you have questions about LCID stock and where it could be heading next feel free to reach out to us in our free alerts room!


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