How far could Lucid shares soar after Q3 results?

The Lucid (NASDAQ: LCID) share price is at $52 right now, after dropping back slightly from its high of $55 last week. The stock only went public through a SPAC deal in July 2020, yet investor interest is running at fever pitch. And this optimism for Lucid may be well placed.

MotorTrend Car of the Year

The company’s flagship $144,000 Lucid Air model recently won the 2022 ‘MotorTrend Car of the Year.’ It’s the first time a company has won the award with their first car. It was praised for its efficiency and range — two metrics that have historically kept owners of traditional Internal Combustion Engine (ICE) vehicles from switching.

The Dream R edition achieves 520 miles of range on a single charge. For perspective, that’s enough range to drive from London to York, and back, with almost 100 miles to spare. The US Environmental Protection Agency (EPA) has certified it as the longest-range car in the USA, with MotorTrend hailing it as ‘the new benchmark.’ And more affordable versions will be coming on to the market next year.

CEO Peter Rawlinson previously worked at Tesla and helped engineer the Model S, which won the award back in 2012. It’s possible that investors are envisioning a scenario where Lucid’s share price grows as rapidly as Tesla’s over the next few years. In 2012, Tesla traded for around $6 a share, and has since risen an eyewatering 18,500% to $1,116. Replicating even a small fraction of this success would delight Lucid shareholders.

Lucid share price: Q3 results

In Q3 results, the start-up revealed that customer car reservations had risen to 13,000, worth $1.3 billion. Reservations have since increased to 17,000. In addition, Lucid ended the quarter with $4.8 billion in cash, which it will use to fuel expansion.

Unlike rival Rivian, production has started in its Advanced Manufacturing Plant (AMP) in Arizona, with the capacity to build 34,000 vehicles per year. However, it’s expanding the space by 2.85 million feet to increase production to 90,000 per year by the end of 2023.

Rawlinson said that he was proud of beginning ‘production of vehicles for customer deliveries, continued investing in capacity expansion…and new retail and service locations in advance of the Lucid Air launch.’ Looking ahead he expects ‘significant demand…confident in our ability to achieve 20,000 units in 2022.’ But he acknowledged the ‘challenges facing the automotive industry, with global disruptions to supply chains and logistics.’ A key concern going forward will be the microchip shortage, as electric vehicles use more than twice as many as oil-powered cars.

Moreover, Lucid has significantly more competition than Tesla faced back in 2012. In addition to Elon Musk’s trillion-dollar company, it will also be competing against US rivals like Amazon and Ford backed Rivian, Chinese rivals such as NYSE-listed NIO and XPeng, and legacy manufacturers like General Motors and Toyota, who are both investing heavily in the EV revolution.

Some perspective is important too. In their 2020 financial year, Toyota sold around 9 million ICE cars, far surpassing global EV sales. Tesla has delivered more than 600,000 electric cars so far this year. Even Rivian, which has barely started production, has a current build capacity of 150,000 per year compared to Lucid’s 34,000.

And Rivian’s share price has fallen by 33%, from a high of $172 on 16 November to $115 today. With Lucid’s share price spiking, it’s likely that short-term investors will attempt to make a quick profit off its volatility, which makes a fair share price difficult to discern. But it’s also possible that investors are selling some Rivian stock to buy Lucid, simply to reduce their risk by diversifying their portfolios.

The Lucid share price could continue to soar. It’s created a strong product, with clear consumer demand. However, it’ll be facing stiff competition from better established competitors. Early Tesla investors may have faced a similar conundrum.

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*Based on revenue excluding FX (published financial statements, June 2020).