Lucid (LCID)

Lucid (LCID) might have reaffirmed on its Q1 earnings call the production target of 12,000 to 14,000 units in 2022, but Morgan Stanley’s Adam Jonas thinks that figure is out of reach.

“We forecast 9.9k deliveries for FY22 which we believe may be on the aggressive side given the company delivered 360 vehicles in 1Q including approximately 185 (our calculation) in the month of March,” the analyst explained.

To come good on the reiterated guide and based on the assumption of “minimal complete” vehicles in inventory, Jonas reckons the the company would need to deliver units “at 7x to 8x the pace of March.”

Nevertheless, with the results meeting Jonas’ expectations and cash flow even coming in slightly ahead of his estimate, Jonas “applauds the company for controlling cash burn at a highly sensitive time.”

With 5,000 reservations made over the past 2 months, momentum is also looking “really strong,” and considering how hard it is to get a new EV up and running, with the Lucid Dream now turning heads as it zooms by, there are also compliments for the company’s ability to make it this far and get the “compelling model to market.”

But despite the stock shedding 50% year-to-date, Jonas’ issue still lies with a valuation which is not “aligned with a more conservative growth and market trajectory.”

Moreover, to continue to support a business “not fully funded,” Jonas believes the company is likely to seek new injections of capital. While the analyst does not anticipate any additional capital raises this year, he estimates $2 billion of new equity will be raised in FY23 and an additional $3 billion of capital (50/50 equity/debt) in 2024.

As such, Jonas – waiting for a “more attractive entry point,” – sticks to an Underperform (i.e., Sell) rating and $12 price target. That figure accounts for another 36% drop from current levels.

Jonas, though, is Wall Street’s most prominent LCID bear and the current 3 other reviews on file are all positive, making the consensus view here a Moderate Buy. Additionally, despite Jonas’ downbeat projection, the average price target stays a bullish one; at $40.5, the figure suggests shares will be changing hands for a 115% premium a year from now.