lucid car

Lucid Motors (NYSE: LCID) stock is trading sharply lower in US premarkets today after the company released its second-quarter earnings where it revised its 2022 production guidance. This is the second guidance cut from the company this year amid supply chain issues.

Lucid Motors went public last year through a reverse merger with Churchill Capital IV. It was the biggest SPAC merger until then before Grab took the honors later in the year. Nonetheless, Lucid Motors’ merger was the most hyped merger of the year as the company, which is led by a former Tesla employee Peter Rawlinson, was touted as the next Tesla. Rawlinson also presented the company as a worthy competitor to Tesla and the merger presentation had several comparisons between the two companies.

However, Tesla is as much about the cars as Elon Musk’s charisma and the company’s execution. Tesla too suffered a production loss in April in May amid China lockdowns. In Q2 2022, it reported its first sequential fall in deliveries since 2020 as China imposed strict lockdowns that hit its production. However, it still maintained the guidance of 50% CAGR in delivery growth.

Notably, despite the COVID-19 lockdowns, Tesla almost achieved its original guidance of delivering half a million cars in 2020. Execution is what separates Tesla from startup EV (electric vehicle) companies like Rivian and Lucid Motors. Incidentally, Rivian also expects its 2022 production at 25,000 units, which is half of its current capacity.

Like Tesla, both Lucid Motors and Rivian produce cars at their own plants. In contrast, several other startup EV companies have partnered with third parties. NIO, for instance, has partnered with JAC Motors, while Fisker has partnered with Magna and Foxconn. Even Lordstown Motors has sold its plant to Foxconn which will now make the cars.

Lucid Motors Lowers Guidance

In March, Lucid Motors lowered its production guidance from 20,000 units to 12,000-14,000 units. Now, it has lowered the guidance to 6,000-7,000 units. The guidance is now only about a third of what it had originally provided. It delivered only 679 cars in the second quarter and said that it has total reservations of 37,000 units which is 7,000 higher than the previous quarter.

In his prepared remarks, Rawlinson said, “Our revised production guidance reflects the extraordinary supply chain and logistics challenges we encountered.” He added, “We’ve identified the primary bottlenecks, and we are taking appropriate measures – bringing our logistics operations in-house, adding key hires to the executive team, and restructuring our logistics and manufacturing organization.”

The company has been burning cash like most other startup EV companies. It ended the quarter with total cash and cash equivalents of $4.6 billion. The company estimates that the cash can fund its operations until the end of 2023. As part of the merger, Lucid Motors had received billions of dollars in cash, including from the PIPE (private investment in public equity), where its existing investor PIF (public investment fund) of Saudi Arabia also participated.

While Lucid Motors is trading lower today after the earnings, yesterday both SoFi and PayPal surged after the earnings release. While PayPal’s earnings were largely in line, it surged on reports of activist investor Elliott Management taking a stake in the company. Separately, Elliott has also disclosed that it is now the largest stockholder of Pinterest.

Some Wall Street analysts are bullish on Lucid Motors

Lucid Motors reported revenues of $97.3 million in the second quarter, with a per-share loss of 37 cents. Among all the EV companies, only Tesla has turned sustainably profitable and posted a net profit in every quarter since Q3 2019.

Some Wall Street analysts are bullish on Lucid Motors stock and last year Bank of America advised buying Lucid Motors stock, comparing it with Tesla and Ferrari. Lucid Motors’ stock rose to its all-time high of $57.57 in Q4 2022 after the listing of Rivian. At its peak, Lucid Motors commanded a market cap higher than Ford. Rivian’s market cap also soared above $150 billion amid the frenzy.

However, the euphoria has since cooled, and both Rivian and Lucid Motors trade at a fraction of their all-time highs. In Rivian’s case, both Amazon and Ford, who are its top two investors, have booked billions of dollars in losses over the last two quarters.

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