Lucid Group stock analysis: how high can LCID reach?

Lucid Group (LCID) stock price continued rising on Thursday as demand for electric vehicle companies rose. It jumped to a high of $3.37, its highest point since February this year. It has soared by over 45% from its lowest point this year.

Lucid’s turnaround is continuing

There are increasing signs that Lucid Group’s turnaround is gaining steam after being under pressure for a long time.

In its recent statement, the company said that it produced 2,110 vehicles in the second quarter and sold 2,394 during the period. These figures were relatively higher than expected and what it made and sold a year earlier.

The management expects that its growth will continue in the coming quarters. Precisely, the management hopes that its yet-to-be-launched Gravity vehicle will help it achieve this goal. 

Gravity will be a Sports Utility Vehicle with an estimated range of up to 400 miles and a seating capacity of up to 7. It will be able to move from 0 to 60 miles per hour in under 3.5 seconds and will start at less than $80,000. 

Gravity is important because of the popularity of SUVs in the United States and the fact that it will now be competing with other SUV manufacturers like Rivian and Tesla Model Y. 

Lucid has also announced other strategies to boost its turnaround, including laying off 6% of its workers. These layoffs are expected to help it become a leaner organisation and save money since it is still burning cash. 

Lucid challenges remain

Despite this progress, Lucid Group faces major challenges ahead. First, the biggest issue is that it is still incinerating cash as its losses mount. The most recent results showed that its revenue rose to $172.7 million in the first quarter from the $149.4 million it made a year earlier. 

Its net loss during the quarter came in at $680 million, down from $779 million a year earlier. While this was an improvement, the loss is still a substantial figure. Most of this loss was because of the cost of revenue and research and development (R&D).

Therefore, there is a likelihood that the company’s net losses will continue in the coming years before it turns a profit. 

Second, there are signs that the company could run out of cash if the losses continue. Its cash and cash equivalents stood at $2.1 billion in the last quarter while its short-term investments stood at $1.8 billion. 

Fortunately, Lucid Group has access to capital from Saudi Arabia’s Public Investment Fund, its biggest shareholder. PIC owns over 1.3 billion shares worth over $4.65 billion. Earlier this year, PIC extended $1 billion to the company in the form of a private placement for convertible preferred stock.

Third, the company faces competition challenges in the electric vehicle industry. Some of the top competitors are firms like Tesla, Rivian, Faraday Future, Ford, and BMW. 

Lucid stock price forecast

The daily chart shows that the LCID share price bottomed at $2.3 in May and formed a double-bottom pattern. In most cases, this is one of the most popular bullish patterns in the market.

The stock has now moved to its neckline. Along the way, it has soared above the 50-day and 100-day Exponential Moving Averages (EMA), a positive sign. 

The two lines of the MACD have moved above the neutral point while the Relative Strength Index (RSI) has moved to the overbought point. Also, the Average Directional Index (ADX) has risen above 20.

Therefore, the stock will likely continue rising in the coming weeks. The next key catalyst to watch will be its earnings, which are scheduled to happen on August 5th.

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