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Because the battle within the electrical car house was set to warmth up this yr, chief within the area Tesla (TSLA) fired a significant shot this month. Tesla introduced a sequence of main value cuts across the globe in an effort to considerably develop its supply volumes. Whereas most of the headlines have been targeted on the mass market Mannequin 3 and Y, it was the worth cuts for the Mannequin S and X that basically bought my consideration. Whereas Tesla’s two luxurious automobiles will not have a dramatic affect on Tesla within the close to time period, there’s one other title that is positively impacted, and that firm is Lucid (NASDAQ:LCID).
Not too long ago, Lucid reported its This autumn 2022 delivery and production volumes. The corporate produced slightly below 3,500 automobiles, a brand new quarterly file that was up greater than 50% sequentially. Deliveries additionally completed the yr at a brand new file with 1,932 items, up from lower than 1,400 items in Q3. For the total yr, Lucid got here in with manufacturing of seven,180 items, beating steering that administration had twice lowered (here and here) from 20,000 to 7,000. Deliveries got here in at 4,369 for the yr, so Lucid did finish the yr with a little bit of stock that probably was on its strategy to clients.
The issue for Lucid is that the supply print wasn’t precisely nice, though expectations had come down tremendously all through 2022. Because the chart beneath exhibits, road income estimates have been greater than halved over the past 13 months, with the current average estimate being the bottom I’ve seen to this point. Whereas Lucid will nonetheless report super income share development numbers for just a few extra intervals, that is solely as a result of yr in the past quarters had subsequent to nothing for complete income.
This autumn 2022 Income Estimates (Searching for Alpha)
As Lucid appears to extend volumes, administration is aware of that costs have to return down. The Air Dream Version began at $169,000, however the Air Pure model will begin at about half of that. The Air is Lucid’s model of the Tesla Mannequin S, and whereas the Lucid has extra vary, Tesla has significantly better service infrastructure in place together with its large supercharging community. Lucid will open reservations for its Mission Gravity SUV in just a few months, which might be a competitor to the Tesla Mannequin X.
Tesla refreshed the Mannequin S and X a few years in the past, though on account of covid and provide chain points it has taken a while for manufacturing to actually ramp up. Tesla delivered over 66,700 items of its two luxurious automobiles final yr, with somewhat little bit of stock constructing at yr’s finish. That will get me to the latest value cuts, which have been relatively vital. This is what we noticed in america, for instance:
- Mannequin S LR: $104,990 to $94,990
- Mannequin S Plaid: $135,990 to $114,990
- Mannequin X LR: $120,990 to $109,990
- Mannequin X Plaid: $138,990 to $119,990
Clearly at these costs Tesla is not going to see volumes soar dramatically prefer it would possibly with the Mannequin 3 and Y value cuts. Nonetheless, these cuts for the S and X are solely going to make Lucid’s development plan a bit harder, particularly as Tesla begins to ship extra S and X to worldwide markets. We do not have a set of steering but for 2023, however Tesla might be able to produce as many S and X automobiles in 1 / 4 as Lucid will be capable to do all yr. Traders may even be wanting ahead to see what number of reservations Lucid nonetheless has, to see if the Tesla value drops and or financial worries are impacting potential demand.
The issue for Lucid is that the Air is the corporate’s solely car at present, whereas Tesla might reduce Mannequin S and X costs one other $20,000 if it wished to and it will not make a significant distinction. In my previous article on Lucid, I detailed simply how unhealthy the monetary state of affairs was. For the primary 9 months of final yr, the corporate’s operations misplaced over $1.84 billion, and Lucid burned virtually $860 million of money in Q3 alone.
As I used to be writing that earnings article, Lucid introduced it could be elevating extra capital. In the long run, greater than $1.5 billion in new cash was brought in, though this resulted in a little bit of dilution. Including these funds to the Q3 complete would have put the corporate at about $5.37 billion of complete money, however that was earlier than any burn throughout This autumn. Lucid should not want any extra capital within the subsequent quarter or two, however later this yr or early in 2024 one other elevate is perhaps wanted if money circulate traits don’t considerably enhance. The corporate does have an enormous backer behind it within the Saudi Arabia Funding Fund, which added to its giant place in the newest capital elevate.
Whereas the variety of excellent shares continues to rise, the variety of bets towards the title has additionally elevated just lately. Because the chart beneath exhibits, quick curiosity in Lucid rose fairly steadily all through 2022, ending the yr at a brand new excessive. With greater than 28% of the estimated float quick, Lucid is without doubt one of the most shorted names on the market at present. I will be curious to see if quick curiosity heads even greater as soon as we get the following replace or two that replicate the latest Tesla value reduce data.
Lucid Brief Curiosity (NASDAQ)
As for Lucid shares, they’ve began off the yr in the correct route, with development names like Tesla bouncing and a strong earnings report from Netflix (NFLX) serving to the tech house final Friday. Nonetheless, Lucid’s shut final week at $7.82 continues to be very near the underside finish of its 52-week vary that goes from simply over $6 a share to almost $40. The average price target of $14.14 implies super upside from right here, however that determine was over $40 a yr in the past and look the place we are actually.
I can not justify that road common valuation in the intervening time. As a reminder, we’re speaking about an organization that solely beat its manufacturing goal for 2022 after it was slashed by 65%. Lucid has not confirmed it will probably ramp its volumes in a short time, and you might be nonetheless coping with losses and money burn. If I assume that the corporate does 90% of the road’s projection for revenues in 2024 and apply the Tesla value to gross sales a number of, that provides me a valuation of $13.22 billion. Based mostly on a share depend that may very well be round 1.9 billion by then, we’re taking a look at a inventory that is below $7. The bears would possibly even argue {that a} low cost to Tesla is warranted given the area of interest of the market that Lucid is focusing on proper now.
In the long run, Lucid finds itself in a really robust spot now with Tesla reducing costs on its luxurious automobiles. Whereas Lucid met its twice lowered manufacturing steering for 2022, deliveries have nonetheless upset to this point, and competitors is not precisely going away. Whereas the November capital elevate will ease funding considerations for the close to time period, that is nonetheless a reputation that’s dropping a number of cash and burning masses of cash. With Tesla with the ability to flex its muscle on the excessive finish much more if it needs to, one other robust yr for Lucid is probably going forward of us.