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Is Lucid Motors' $41 Billion Market Cap Too Expensive?

To say that there's a lot of investor optimism about Lucid Motors' (NASDAQ: LCID) ability to execute on its vision would be an understatement. The company has a market value of more than $41 billion despite the fact that its first cars are just rolling off the assembly line. In this Fool Live video clip recorded on Oct. 18, Fool.com contributors Danny Vena and John Rosevear discuss whether this high valuation could be justified.

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John Rosevear: The key here is valuation, and I'm going to leave it up to readers to decide whether a company that just began shipping a few vehicles that has a $41 billion market cap is cheap or expensive. I think if you look at Ford Motor Company (NYSE: F), which isn't far above that, it's expensive. But if you look at Tesla (NASDAQ: TSLA), which is back up toward $800 billion or whatever again today, it looks really cheap for the opportunity involved. What I will say is that this is a good company that in the 4-5 years I've been watching it has delivered on every promise they've made. The one exception was the production start for the Air, which they originally anticipated was going to be in the spring and there is a great story behind that.

Former Ford CEO Alan Mulally, who many Fools will remember, including me, as the person who powered that wonderful run in Ford's share price that we saw in the first half of the last decade, is advising Lucid. He's on the board of one of their investors and he's advising Lucid and he went in and said, "Look, hold up production, do an additional pre-production run, do these extra quality tests and so forth." Lucid did that. The point being, when you are a first mover in this space like Tesla back in 2011, you can deliver a car that's not quite perfect because people are buying it for that great technology that's in there.

The early adopters don't care so much whether the panels line up correctly, whether there's flaws in the paint or whatever. But now it's show time for everybody, including Tesla and the Air had to be perfect going out the door and he advised them to put extra steps in the plan to ensure that and they did, and that's why they waited till September to begin production. Good company, good management. People laughed at their range claims when they were first announced a few years ago, but then they got the EPA certification that was bang on what they said it was going to be. They're bang on schedule in getting these cars out.

Early reviews have been phenomenal that this is a wonderful car to drive that offers a genuine luxury experience and is faster than the proverbial scalded small animal. I'm looking forward to driving one. I sat in a prototype. I have not driven one of the production cars yet. The prototype was really impressive. They're, of course, a luxury company, but their model of luxury is really different. It's light, it's airy. There were linen fabrics and different woods on surfaces and so forth. Very elegant, but not ostentatious like a German luxury car, a British luxury car or a Cadillac or something like that. What they call a California relaxed luxury, which is a little different in flavor and in execution from what anybody else is doing. Early drivers seem to really like how it's come out and how it's been expressed in the initial models of the Air.

Danny Vena: Again, now this sounds to me like, and maybe I'm drawing a conclusion here, but it sounds like Tesla might have a little bit of actual competition here in the near future. Is that an accurate assessment?

Rosevear: For right now, Lucid is positioning the air as the car you buy after you've had the Tesla. It's a little higher price point, it's more luxurious, it's faster, it's got more range and so forth. But I think if you look at the timing of certain announcements by Elon Musk when they announced range boosts to some cars and so forth, they're watching Lucid closely. Given that there are number of former Tesla people in senior positions at Lucid, it's no wonder why, I would be, too.

Again, as an investment, you have to look at that valuation and decide for yourself whether it's cheap or expensive. I think it's both cheap and expensive myself. I have not been able to bring myself to pull the trigger on the stock, although it's a company where we're talking about leadership teams and so forth. I spent some time with Peter Rawlinson, the CEO and a couple of his deputies and I really like what they're doing.

I really like who they are and their sense and I really like their sense of themselves and their position in the industry and that they've delivered on all of their promises so far, which is not always something we've seen in this space, not only Tesla, but Tesla certainly where they'll come out and say three months maybe, six months definitely, and then it's sometime further down the road. They are being very careful to promise things they can achieve and then to achieve what they've promised. I like that in a management team. I like the chips on shoulders dynamic. It's not a cheap stock. I think that's my final takeaway.

Danny Vena owns shares of Tesla. John Rosevear owns shares of Ford. Matthew Frankel, CFP® owns shares of Lucid Group, Inc. The Motley Fool owns shares of and recommends Tesla. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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