Is Lucid Motors Stock Worth Buying After the Dip?

The bloodbath in electric vehicle (EV) stocks has only worsened in 2024, and last week, Lucid Motors (LCID) stock fell to an all-time low of $2.54 before rebounding slightly. It wouldn't be fair to single out LCID, though; the sell-off has been broad-based, and even Tesla (TSLA) shares are down 13% YTD.

The sell-off in EV stocks comes at a time when the S&P 500 Index ($SPX) has soared to a record high, and the tech-heavy Nasdaq-100 Index ($IUXX) also closed at a record high last week. Is Lucid Motors a growth stock worth buying after the dip? We’ll explore in this article.

Why Is LCID Stock Dropping?

LCID stock is down 31% so far in 2024, and its drawdown is similar to that of Rivian (RIVN), which also went public in 2021 – albeit via an IPO, while Lucid opted for a special purpose acquisition company (SPAC) reverse merger.

Multiple factors are driving down EV and auto stocks in 2024. First, concerns over EV demand are lingering, and the visuals of some stranded Tesla cars whose batteries died amid the harsh Chicago winter did not help the cause of EV stocks.

Furthermore, and as has been the case for over a year now, Tesla spooked markets with its price cuts earlier this month - this time, in China. The U.S. EV giant’s relentless price cuts have raised concerns over the health of startup EV players like Lucid and Rivian, which are struggling with a perennial cash burn.

Finally, I believe markets are also spooked by the possibility of Donald Trump returning as the U.S. President for a second term. The former President is no fan of electric cars (or, for that matter, green energy) and is a climate change denier - unlike Joe Biden, whose administration took several steps to increase EV adoption rates in the country.

EV Stocks Have Slumped

The current slump in EV stocks is nothing short of a mirror image of the euphoria that we saw between 2020 and 2021, when EV names soared to astronomical heights, and Lucid Motors’ market cap neared $100 billion while Rivian’s topped $150 billion.

Cut to 2024, and Lucid Motors' market cap is a mere $6.2 billion, while Rivian’s market cap has slumped below $15 billion. Both of these companies have loads of cash on their balance sheets, and Lucid had cash and short-term investments worth $4.9 billion at the end of September.

Is Lucid Motors a Growth Stock Worth Buying?

While Lucid Motors continues to face headwinds both on the macro and company-specific levels, I believe the stock looks worth the risk at these depressed valuations. Here’s why:

• Strong product proposition: Unlike many other startup EV companies that have, at best, “me-too” products - or worse, unviable and questionable products, Lucid Motors has a reasonably good offering, and MotorTrend awarded the Car of the Year 2022 award to Lucid Air. Additionally, Lucid Air has the second-highest energy efficiency among the models currently on sale, according to the U.S. Department of Energy.
• Tech sharing partnerships: Last year, luxury carmaker Aston Martin partnered with Lucid to buy electric motors and batteries, which provides credence to Lucid Motors’ claim that it offers a world-class product. During the company’s Q3 earnings call, while CEO Peter Rawlinson did not provide specific details, he said that the company has “seen an increase in inbound interest to access our great technology.” Tech-sharing partnerships could be a key driver for Lucid as automakers try to cut down on their R&D costs and instead share tech with others.
• Saudi plant and backing from the oil-rich kingdom: Lucid has started assembling cars in Saudi Arabia, which has the option to order up to 100,000 cars from the company. The oil-rich nation’s sovereign wealth fund is Lucid Motors’ biggest stockholder, and has plowed $3 billion into the company since late 2022. It was also rumored to acquire Lucid Motors, and while nothing concrete has developed, the possibility cannot be ruled out given Lucid’s tepid valuations and Saudi Arabia’s focus on clean energy.
• Launch of Gravity SUV: Later this year, Lucid Motors will start delivering the Gravity SUV, which should help it propel its deliveries.

Lucid Motors Stock Forecast

Wall Street analysts are bearish on LCID, and it has a consensus rating of “Hold” from analysts. Of the 12 analysts covering the stock, 10 rate it as a “Hold” while 2 as a “Strong Sell.” However, its mean target price of $5.47 is a 90.6% premium to the current price level.

I believe Lucid Motors, along with Rivian, could be among the “last men standing” in an increasingly overcrowded and hypercompetitive U.S. EV industry, thanks to its strong product proposition and backing from Saudi Arabia, which has opened its coffers to fund the company multiple times since it was founded. 

To be sure, I have been bearish on Lucid Motors ever since the company went public in an overhyped merger which valued it at a lot more than what it should have been. Now, with Lucid Motors’ valuation dropping to much more palatable levels, I find it worth the risk at these prices.