Lucid: A risky bet with high potential?

American luxury electric car manufacturer Lucid Group $LCID continues to face uncertainty about its growth and profitability. Still, Benchmark analyst Mickey Legg has come up with a target price of $5, implying a potential upside of nearly 90% from the current $2.69.

Strong support from Saudi Arabia

-Saudi Arabia owns nearly 60% of $LCID and has pledged to buy 100,000 vehicles by 2032.

-$LCID has access to capital and stable funding, but has been burning cash at a rate of $11 billion and Wall Street expects it to use another $7 billion between 2025 and 2026.

Expansion into new markets

-$LCID is increasing shipments to Europe and preparing to enter the Chinese market, where there is demand for luxury electric vehicles.

- It delivered a total of 10,241 vehicles in 2024, with Saudi Arabia accounting for nearly 25% of sales.

Premium strategy and competition

- The $LCID seeks to compete with Rivian and Fisker with premium models with long range and luxury design.

- It plans to introduce more affordable models in 2025, which could boost sales.

Skepticism on Wall Street

- Only one analyst (Mickey Legg) recommends a "Buy," eight have a "Hold" rating and four have a "Sell" rating.

- The average analyst target price is $2.60, below the current market value.

Macroeconomic and Market Challenges

- Slowing EV sales growth - only 7% growth in 2024 versus 46% in 2023.

- High competition and pressure to reduce costs and improve production efficiency.

Outlook and investment view

Lucid $LCID has a strong financial backing from Saudi investment, but its future depends on its ability to increase sales, expand production and improve operational efficiency.

Legg's optimistic target price ($5) may be appealing to riskier investors, but for now, most of Wall Street remains skeptical. The key for Lucid will be whether it can achieve higher profitability and sustain sales growth.