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Lucid Stock Earnings Review: Bad Time To Miss On Growth

Lucid stock sold off on the back of an earnings miss and production guidance cut. Here is what investors should consider before buying LCID.

As I type this sentence, Lucid stock  (LCID) - Get Lucid Group Inc. Report is selling off in after-hours trading. The culprit: an all-around Q4 earnings miss that was ill-received by investors. Shares traded 13% lower.

Today, Wall Street Memes looks at the results of the quarter and, most importantly, the revised production guidance for this year that is likely at the core of bearish reaction. We wrap up by asking: is this a good time to own LCID?

Figure 1: Lucid Stock Earnings Review: Bad Time To Miss On Growth

Figure 1: Lucid Stock Earnings Review: Bad Time To Miss On Growth

Lucid: Q4 by the numbers

One thing should be made clear right away: Lucid, a company valued at a whopping $43 billion, does not have much to brag about regarding actual financial results. Instead, the automaker’s appeal lies in what it could become in the longer-term future.

Still, tiny revenues of $26 million lagged consensus by $7 million. This must have been a mild disappointment for investors on the back of only 125 customer deliveries in 2021.

Although GAAP net loss of 64 cents per share was quite a bit worse than expected, what probably pushed LCID stock lower was the outlook for the current year. Lucid previously expected production to reach 20,000 in 2022, but is now guiding for no more than 14,000.

The reason for the guidance cut should sound familiar to most at this point: supply chain constraints. Lucid also cited quality issues that led the company to seek supplier alternatives, further delaying production.

Should the above fully tell the story of a weak outlook, then investors can at least feel more comfortable about demand and the luxury car maker’s longer-term prospects.

Outside the P&L, Lucid reported free cash use of nearly $1.5 billion in 2021, nearly half a billion worse YOY. The better news is that the company still has a sizable balance of $6.3 billion in cash, which will be crucial to finance aggressive growth ambitions.

What about the investment thesis?

When it comes to its flagship product, the Lucid Air, the auto company has already flashed its credentials by winning the 2022 MotorTrend Car of the Year award. Reservations for over 25,000 vehicles have been reported, pointing at a revenue pipeline of $2.4 billion.

Still, the steep production ramp up and aggressive revenue projections suggest a speculative investment, in my view.

In July of last year, Lucid presented its case for $22.8 billion in revenues by 2026 — see chart below. To get there, the company was counting on strong sales of the Lucid Air (the 2022 guidance downgrade suggests more challenges than originally anticipated) and the successful launches of new car models between now and then.

Figure 2: Lucid's total revenue projection.

Figure 2: Lucid's total revenue projection.

Even at such aggressive targets, LCID stock still trades at a pretty chunky valuation multiple. Considering a current enterprise value of around $39 billion (market cap plus net debt), the 2026 EV/sales multiple of 1.7 times is still pretty high for a company whose long-term margin profile is still a question mark.

None of the above would matter as much if Lucid had delivered better growth projections, which could have supported LCID stock on sheer momentum and positive sentiment. But in the current market environment, it is a bad idea to miss on growth expectations.

Twitter speaks

Lucid’s Q4 earnings report was mixed, to put it nicely. Do you think that LCID is a good stock to buy, following earnings season?

(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting Wall Street Memes)