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Should You Buy Lucid Stock While It's Trading Below $3?
Electric vehicle (EV) sales are increasing in the U.S. thanks to traditional automakers releasing electrified models and start-ups like Lucid Group (NASDAQ: LCID) selling impressive EVs. The slow shift in the auto industry to EVs is evident in the latest vehicle sales figures, which show electric vehicles account for about 9% of total vehicle sales in the U.S., up from just under 8% last year.
Despite increasing EV sales, some electric vehicle start-ups, including Lucid, are having difficulty ramping up production and lowering costs to the point of profitability. Here's where Lucid is struggling to get going and why investors should probably pass on this EV stock for now, despite shares trading around $2.69 as of this writing.
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What's happening with Lucid
I've written about Lucid's struggles plenty of times, so let's start with what Lucid is doing right this time. The company created a great EV sedan that made it on Car and Driver's 2025 10Best list, earned the 2024 Best Luxury EV accolade from Top Gear, and MotorTrend's Car of the Year back in 2022, among other awards.
Lucid makes stunning, high-end vehicles and recently started production of its Gravity SUV, which will could further expand its customer base.
Image source: Lucid Group.
However, having a good product doesn't always translate to being a good company to invest in. One of the first red flags is that Lucid's losses widened in the third quarter (which ended Sept. 30). The company's losses were $992 million, much larger than its loss of nearly $631 million in the year-ago quarter. It's also disappointing that vehicle production increased just 16% year over year in the quarter, to 1,805 vehicles. Lucid's management estimates it will produce 9,000 vehicles this year, a very modest increase from 8,428 last year.
All EV start-ups lose money for a while, so that's not surprising to see, but widening losses aren't a good sign, and neither is the fact that the company recently had to raise additional money through a public offering. Lucid issued about 262 million shares, which diluted shareholder value.
Lucid also had to tap into one of its largest investors recently, as Saudi Arabia's Public Investment Fund (PIF) invested another $1.5 billion in the company. The extra funds give Lucid enough money to keep the company running through 2026.
The combination of needing additional funding, issuing more shares, and widening losses makes me hesitant that Lucid's finances are moving in the right direction. Add to all that the company's modest vehicle production increase this year, and the negatives outweigh the positives right now.
Lucid stock isn't a buy
I know some investors will look at Lucid's $2.69 stock price (as of this writing) and assume there isn't much to lose by picking up some shares. There's nothing wrong with putting a little money toward riskier investments, but it's worth noting that Lucid's stock is technically expensive right now.
Lucid's stock has a price-to-sales ratio of 8.1, while fellow EV start-up Rivian Automotive has a P/S ratio of just 3.1. With this premium, widening losses, and the company still trying to find its production footing, I think it's best not to buy Lucid stock right now.
That doesn't mean Lucid's products aren't good, but investors should be cautious about betting on this fledgling EV stock until it can significantly increase production and lower expenses.
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Chris Neiger has positions in Rivian Automotive. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
