Ryan Vanzo, The Motley Fool
4 min read
In This Article:
-
The EV maker's sales are expected to explode in the coming year.
-
But analysts fear that Lucid Group will face financing troubles.
-
Significantly more funding will be needed in the period ahead.
Lucid Group (NASDAQ: LCID) stock has tremendous long-term growth potential. Its market capitalization right now is under $7 billion -- less than 1% the size of Tesla. This year, sales are expected to grow by 78%. Next year, another 96% sales growth is expected.
There's only one problem. According to analysts from Bank of America, there is one emerging risk that is "more consequential" than the market realizes. It's possible that this risk could eventually sink the entire business.
After reporting a $397 million fourth-quarter loss this February, Lucid revealed that its longtime CEO, Peter Rawlinson, would be stepping down. It was a surprise to most investors. Rawlinson's comments made the move seem less abrupt than it appeared from an outside perspective, but his absence from the quarterly conference call drew uncertainty.
After leading the electric vehicle (EV) maker for 12 years, overseeing the launch of both its Air sedan and Gravity SUV, he simply stated that it was time to move on. "Now that we have successfully launched the Lucid Gravity, I have decided it is finally the right time for me to step aside from my roles at Lucid," Rawlinson explained.
Regardless of why Rawlinson stepped aside, many analysts weren't pleased. "We think the departure of Lucid's founder, CEO, and CTO, Peter Rawlinson is much more consequential than understood by the market," Bank of America analyst John Murphy explained after downgrading the stock to underperform. "We now expect product development to stall, consumer demand to be dampened, and anticipate additional funding opportunities could be put at risk."
Access to funding is the most critical risk for Lucid. The company now has less than $1.9 billion in cash on the books, yet it posted a $2.4 billion loss over the last 12 months. The company already raised $1.75 billion in late 2024 despite a weak share price, and its shares outstanding have jumped by roughly 30% over the past six months. All in all, Lucid has been racing to raise cash.
Yet its cash burn remains very high, share dilution is accelerating, and its share price remains in the dumps, limiting its ability to self-finance without massively diluting shareholders. If capital access is further restrained, as Bank of America believes could happen, the situation could quickly become dire.
