Could Lucid Motors Be the Pathway to Millionaire Status?
Lucid Motors (LCID at 8.58%) is essentially hoping to tag along in Tesla's footsteps (TSLA at 8.22%). Individuals purchasing Lucid shares primarily bet that the company can, to some extent, replicate Tesla's success. While Lucid is making strides towards becoming a more formidable automaker, it's still far from reaching Tesla's level of achievement.
Tesla - The Maker of Millionaires
On a simplified note, Tesla was the first public enterprise to manufacture solely electric vehicles (EVs). The financial sector and the automotive industry were skeptical of its potential to challenge established car manufacturers. However, Tesla defied expectations and, in the process, saw its stock price surge over 27,000%. An initial investment of $10,000 in Tesla's IPO would now be worth approximately $2.7 million.
Given Tesla's triumph, numerous other companies have chosen to venture into electric vehicle production. This group includes Lucid, along with most significant automakers. When Tesla first emerged, it was essentially the only EV player, successfully demonstrating to the world that electric vehicles were a genuine and viable option. Competition within the industry has since intensified, with Tesla holding a strong stance as the world's leading electric vehicle manufacturer.
An Intriguing Comparison
In the third quarter of 2024, Tesla delivered 462,890 vehicles. In contrast, Lucid delivered 2,781. These figures highlight the significant gap between the two companies, which can be viewed as both an opportunity and a risk.
Lucid's Accomplishments
While the number of vehicles Lucid delivered in the third quarter was negligible compared to Tesla's deliveries, it would be unfair to label the company a failure. For instance, the 2,781 vehicles Lucid delivered represented a 90% increase over the third quarter of 2023. This demonstrates the company's ability to transform from a concept into a fully functional and marketable product.
This achievement, however, raises another concern. Lucid is still working to establish its business, requiring a substantial financial investment.
Expanding a new enterprise often results in financial losses, which can be reflected on the balance sheet. While Tesla reported earnings of $0.62 per share in the third quarter of 2024, Lucid reported a loss of $0.41 per share, an increase from a loss of $0.28 a year prior. This information helps to explain why, in the third quarter 2024 earnings release, management emphasized that they "closed the quarter with approximately $5.16 billion in total liquidity."
The main takeaway is that Lucid is making steady progress towards becoming a profitable car company, but there is still much work to be done. The optimistic view is that Lucid's cash reserves will enable it to reach this goal and potentially become another multi-millionaire-making stock like Tesla. The pessimistic view is that the company has a limited timeframe to build its business, which is now facing significantly more competition than Tesla did when it first entered the market.
Lucid - A Story Stock
If you view Lucid's journey as a glass half full, you might choose to invest in it. If you see it as glass half empty, it may be wise to observe its progress from a distance.
There is a possibility that Lucid will succeed as a business, but several high-profile electric vehicle companies have already faced bankruptcy. Unless you're prepared to assume this level of risk, it may be advisable to observe the Lucid story unfold from the sidelines.
Investors viewing Lucid as a potential success story in the electric vehicle market might consider making an investment, as the company demonstrates growth and progress towards becoming a profitable business. However, the significant financial investment required and the competitive landscape may also discourage more risk-averse investors, who might choose to monitor Lucid's progress from a distance.
Given Tesla's impressive ability to generate wealth for early investors, many individuals might be intrigued by the prospect of investing in another electric vehicle company, such as Lucid, hoping that they too can reap the financial rewards.
