Lucid Group (LCID -0.20%) had a record-setting year in 2024. The game plan is to break some more records in 2025. However, the stock is more than 90% below its peak prices in 2021 and is trading hands at less than $3 per share. There’s a lot going on here for investors who are wondering if Lucid is worth buying today.
What has Lucid achieved?
Lucid is an upstart electric vehicle (EV) maker. The fact that it has gone from an idea to production is a hugely impressive feat that shouldn’t be diminished. And 2024 was a year filled with important achievements, so the company is executing reasonably well right now.
To put some numbers on that, Lucid delivered a new record number of vehicles in each quarter of 2024, with year-over-year growth of 71% in the fourth quarter. Its gross margin improved steadily throughout the year, with a year-over-year improvement of 72 percentage points in the fourth quarter. It started production of a new line of vehicles, the Gravity SUV, and delivered the first of the new vehicles to customers. It also improved the efficiency of its batteries, achieving a record-setting range rating.
The company has even bigger plans for 2025, with the goal of more than doubling its production for the year. That will likely lead to a material increase in the number of vehicles Lucid delivers to customers. It should also further improve gross margin as increased scale allows for manufacturing costs to be spread over more vehicles.
The one big thing that is highly unlikely to happen in 2025, which didn’t happen in 2024, is positive earnings. This brings up an important fact about Lucid. It is still a start-up company attempting to break into the highly competitive and capital-intensive auto industry.
LCID data by YCharts
Some perspective with Lucid will help
Lucid has a lot to be proud of, but there are some very big caveats to consider if you are thinking about buying the stock. The record-setting fourth-quarter production amounted to just a rounding error compared to its much larger industry peer, Tesla. Even doubling production in 2025 to around 20,000 vehicles will leave Lucid well behind Tesla on the production side, given Tesla’s 2024 production of nearly 1.8 million vehicles.
In addition, Lucid’s gross margin is moving in the right direction, but it still has a deeply negative gross margin. Indeed, the year-over-year improvement in the fourth quarter was from a negative gross margin of 161% in the final stanza of 2023 to a negative gross margin of 89%. It is currently selling every car for less than it costs to build one of its cars.
LCID Cash and Short Term Investments (Quarterly) data by YCharts
Then there’s the balance sheet. Lucid ended 2024 with roughly $4 billion in cash and short-term investments. That’s roughly where it started out in 2024, but as the chart above highlights, there was a big dip in the middle of the year. The company’s coffers were refilled thanks to the issuance of new stock, which dilutes current shareholders. Given the still huge spending needs here, it is likely that even more cash will need to be raised in the future.
Is Lucid a buy?
Lucid’s stock is trading below $3 a share for a reason — it is a high-risk investment. The company is making important strides, but it is still unclear if it will be able to become a sustainably profitable business. Conservative investors will be better off avoiding it. More aggressive growth investors, however, might find it of interest to note the solid progress that is being made on key business goals. But go in with your eyes wide open to the risks, notably including dilution from ongoing equity issuances at what are still very low stock prices.