1 Electric Vehicle Stock to Buy Hand Over Fist and 1 With Serious Red Flags | The Motley Fool
Investors may want to think about moving on from this one stock.
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Lucid Motors (LCID 4.32%) is racing to produce vehicles and reach a self-funding state. Lucid's luxury EVs aren't cheap, with the least-expensive model starting at $87,400. As a result, the company has relatively few reservations on hand, reporting just over 30,000 as of May 5. These orders translate into about $2.9 billion in potential revenue, but Lucid isn't even gross margin profitable.
That means it's selling its vehicles and all the labor and materials that go into its cars for less than they are worth. Throw in research and development and administrative costs, and Lucid's financials are problematic. As a result, Lucid's cash balance decreased by $867 million during Q1, dropping its total cash balance to $5.4 billion.
Lucid estimates it has enough liquidity to survive into 2023, although it may find a lack of investor interest if it has to issue shares to raise funds at that time. Alternatively, Lucid could go to the banks for a loan, but it will likely receive funds with unfavorable terms and high rates, crippling its chances at survival.
This year's projected production numbers are 13,000 at the midpoint. If it can achieve this figure, Lucid may be able to survive for another year. If not, Lucid may be looking for a suitor to purchase its business.
That's not a particularly rosy investment case, but it's not all doom and gloom for Lucid.
Saudi Arabia agreed to purchase 100,000 vehicles over 10 years. The initial commitment is for 50,000, with an option for 50,000 more. These orders are expected to begin delivery no later than Q2 2023. However, this time frame is close to Lucid's liquidity lifespan.
I'm not rooting against Lucid, but I am steering clear as an investor.
In my opinion, Tesla is a far better investment than Lucid, as Tesla has a much greater chance of being around a decade from now. As a result, the EV segment of my portfolio is solely focused on Tesla. While there are other options out there, it's hard to make an argument in favor of them versus Tesla.
