On May 5, Lucid Group, Inc. (NASDAQ: LCID) announced 1Q 2022 results. As expected, the company reported modest revenue of US$58 million in the quarter and enormous 1Q 2022 operating income and operating cash flow deficits — US$598 million and US$495 million, respectively.
Perhaps the most constructive element of the release was the company’s affirmation that it expects to produce 12,000 to 14,000 Lucid Air vehicles in 2022. In late February, Lucid reset its 2022 goal to this range from the 20,000 unit target it had articulated as recently as mid-November 2021. The company cited the familiar “supply chain constraints” and a “focus on quality” as reasons for the projected shortfall in 2022.
The fine print of Lucid’s 1Q 2022 earnings release does appear to equivocate at least somewhat on its 2022 production goal. CFO Sherry House said that the 12,000-14,000 range holds “based on the information we have at this point combined with our mitigation plans” for coping with global supply chain challenges and disruptions.
Of course, in order to produce 12,000 to 14,000 vehicles in 2022, equivalent to 1,000+ per month, Lucid will have to increase the pace of manufacturing quite dramatically. The company delivered just 360 cars to customers in 1Q 2022 and 125 in 4Q 2021.
Even assuming that Lucid achieves its 2022 production goals, its current valuation seems difficult to justify. The company currently has more than 30,000 customer (refundable) reservations for Lucid Air models, up from around 25,000 at the end of February. According to Lucid, the 30,000 reservations equate to potential revenue of around US$2.9 billion, or just less than US$100,000 per vehicle on average.
Consequently, Lucid’s revenue this year could reach around US$1.3 billion (assuming it meets the midpoint of production guidance). Lucid’s current enterprise value (EV) is around US$27 billion, so its EV-to-estimated 2022 revenue multiple is more than 20x, an extraordinarily high figure, particularly at a time when nervous investors are finding it difficult to continue to attach elevated multiples to growth stocks.
Lucid burned through substantial cash in 1Q 2022. Its combined operating cash flow shortfall and capital expenditures equaled about US$680 million just in this quarter. In turn, this caused the company’s cash balance to decline to around US$5.4 billion at March 31, 2022, from US$6.26 billion on December 31, 2021.
| (in thousands of US $, except for shares outstanding) | March 31, 2022 | December 31, 2021 | September 30, 2021 |
| Lucid Air Vehicles Delivered | 360 | 125 | 0 |
| Revenue | $57,675 | $26,392 | $232 |
| Operating Income | ($597,530) | ($485,684) | ($497,050) |
| Operating Cash Flow | ($494,639) | ($312,733) | (A) |
| Capital Expenditures | ($185,082) | ||
| Adjusted EBITDA | ($383,781) | ($299,583) | ($244,962) |
| Cash | $5,391,844 | $6,262,905 | $4,796,880 |
| Debt | $1,998,571 | $1,997,057 | $7,955 |
| Shares Outstanding (Millions) | 1,668 | 1,648 | 1,642 |
Significant cash burn should continue for some time, as CFO House said the company’s giant US$5.4 billion cash balance should be “sufficient to fund the company well into 2023.” The likely implication: a substantial equity offering may be required within perhaps twelve months.
Lucid announced positive news in late April. The government of Saudi Arabia, which owns more than one billion Lucid common shares, equivalent to a 62% ownership stake, plans to buy 50,000 Lucid vehicles over a ten-year period and has the option to purchase 50,000 more. Some of the vehicles will be produced at a new factory the company plans to build in Saudi Arabia. (The 50,000 Saudi vehicles are not part of Lucid’s current 30,000 customer reservations.)
The Lucid Air model is a sleek, well-reviewed vehicle. In addition, Lucid has an impressive US$5.4 billion cash balance. However, Lucid shares continue to look very richly priced — even after declining about 65% since late December.
Lucid Group, Inc. last traded at US$18.15 on the NASDAQ.
Information for this briefing was found via Edgar and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
