On Thursday, Cantor Fitzgerald adjusted its stance on Lucid Group Inc. (NASDAQ:LCID), shifting from a Neutral to an Underweight rating, accompanied by a reduction in the price target from $6.00 to $4.00. The revision stems from a series of challenges faced by the electric vehicle manufacturer, including high negative gross margins, a downward revision in the annual production outlook, and waning demand.
The firm has also revised its revenue forecasts for the fiscal years 2024 and 2025 to approximately $724.2 million and $1,651.2 million, respectively. This marks a significant decrease from the prior estimates of $1,654.6 million for FY24 and $5,076.9 million for FY25. The adjustments were influenced by lowered expectations for vehicle production and deliveries as well as anticipated average selling prices (ASPs).
The production estimates for Lucid vehicles have been scaled back to 9,500 units for the year 2024, a reduction from the previously projected 15,000 units. For 2025, the production forecast has been adjusted to 20,000 vehicles, down from an initial estimate of approximately 38,000 units. In an effort to stay competitive within the industry, Lucid has been lowering its vehicle prices, leading to a new blended ASP estimate of around $88,000 for FY24.
Cantor Fitzgerald's price target of $4 is the result of a bottom-up 10-year discounted cash flow (DCF) analysis, assuming an 11% weighted average cost of capital (WACC) and a terminal value based on a 2% long-term growth rate. The firm also highlighted key risks that could impact Lucid's performance, including ongoing supply chain disruptions, slower-than-anticipated customer demand, manufacturing hurdles, and intense competition in the market.
InvestingPro Insights
As Lucid Group Inc. navigates through its financial and production challenges, insights from InvestingPro shed light on the company's current position and what investors might consider. Lucid holds more cash than debt, which is a positive sign of liquidity (InvestingPro Tip 0). However, it's also important to note that Lucid is quickly burning through cash, which could raise concerns about its long-term financial sustainability (InvestingPro Tip 2).
InvestingPro Data shows a market capitalization of $8.47 billion, which is significant but reflects the high expectations investors have for the company. The revenue growth over the last twelve months as of Q3 2023 stands at an impressive 84.64%, indicating strong sales performance relative to the past. However, this is tempered by a quarterly revenue decline of -29.49% in Q3 2023, suggesting some volatility in the company's revenue stream.
Lucid's stock has experienced a strong return over the last month with a 30.74% increase, yet the one-year price total return is at -62.93%, highlighting the stock's high price volatility (InvestingPro Tip 3) and the significant drop investors have faced (InvestingPro Tip 10). Analysts have revised their earnings upwards for the upcoming period (InvestingPro Tip 1), which could be a signal of potential improvements in Lucid's financial outlook.
Investors seeking further insights can find additional InvestingPro Tips that delve deeper into Lucid's financial health and market performance. For those interested, there are 15 additional tips available on InvestingPro, including analysis on profitability, valuation, and stock price trends. To access these insights, consider using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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