LCID

Lucid Rallied Today -- Is It Time to Buy the EV Stock?

Lucid (NASDAQ: LCID) stock jumped in Monday's trading. The electric vehicle (EV) specialist's share price ended the daily session up 4.3%, according to data from S&P Global Market Intelligence.

Lucid stock advanced today thanks to a strong earnings report and guidance from Li Auto. The Chinese auto company's fourth-quarter performance and forward outlook came in much better than anticipated, and the results helped power valuation gains for other companies in the EV space.

Li Auto posted non-GAAP (adjusted) earnings of $0.93 per American depositary share on sales of roughly $5.9 billion, far surpassing Wall Street's expectations. Vehicle deliveries jumped 185% year over year to reach 131,805, and the company's vehicle margin increased from 20% in last year's Q4 to 22.7% in this year's Q4. For the current quarter, Li expects to deliver between 100,000 and 103,000 vehicles -- good for year-over-year growth of roughly 93% at the midpoint of the target range.

No doubt about it -- Li's Q4 report and guidance were excellent -- and some investors are reading the recent earnings report as a green light for other EV players.

Is it time to bet big on Lucid stock?

Investors have been worried about overall demand trends in the EV market lately. Between reports of inventory piling up, price cuts, and production scale-downs from players including Tesla, General Motors, and Ford, Wall Street has become increasingly concerned that growth will weaken substantially in the near term.

Li's strong Q4 report and forward guidance could suggest that these fears have been overblown to an extent. On the other hand, investors should keep in mind that Li's robust performance appears to be bucking broader trends -- and its results don't necessarily mean that Lucid will see similar tailwinds.

For the current fiscal year, Lucid expects to produce roughly 9,000 vehicles -- representing an annual increase of roughly 6.8% over the 8,428 vehicles it produced last year. On the other hand, last year's production numbers actually came in far below the company's guidance for between 10,000 and 14,000 EVs being manufactured.

Meanwhile, the company posted an operating loss of roughly $3.1 billion on revenue of roughly $595.3 million in 2023. The company still ended the year with roughly $4.8 billion in cash, equivalents, and investments, but the business is using capital at a rapid pace -- and its growth appears to be stalling.

With the stock still down roughly 94% from its high, even moderate improvements for Lucid's performance outlook could power big valuation gains. But the economics of the business look weak right now, and investors should understand the EV player is a risky bet.

Should you invest $1,000 in Lucid Group right now?

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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool recommends General Motors and recommends the following options: long January 2025 $25 calls on General Motors. 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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