Lucid Stock: Buy, Sell, or Hold?

Electric vehicle marker Lucid Group (NASDAQ: LCID) has created an award-winning Air sedan and is on the verge of producing its stunning Gravity SUV. But despite its impressive products, the company's shares have plunged 96% over the past three years.

The steep drop has no doubt left Luid shareholders wondering if it's time to give up on the stock, and prompting some to wonder if it's time to buy this EV stock at a discount. Here are a few suggestions.

The case for selling Lucid

There are good reasons to sell a stock, no matter what industry the company is in or what's happening in the market. These reasons mainly include:

• Needing the money for something else
• Rebalancing your portfolio
• The original investment thesis for buying the stock has changed.

I think Lucid's current situation makes it tricky for Lucid shareholders because the automotive market's transition to EVs is very likely, Lucid has a solid product, and is working on releasing new ones.

But the problem is that Lucid is spending tons of money, vehicle production has stagnated, and the company has had to raise additional capital multiple times, including issuing additional shares that diluted current shareholder value.

In the third quarter (which ended Sept. 30), Lucid's net loss widened to $992 million, worse than its loss of $631 million in the year-ago quarter. The company also produced just 1,805 vehicles, a modest 16% increase.

Making matters worse is that Lucid recently raised additional cash through a public offering of 262 million shares, as well as an investment from Saudi Arabia's Public Investment Fund (PIF). Lucid got an additional $1.67 billion in cash (a good thing), but the additional stock diluted current shareholder value (a bad thing).

With its widening losses, slower-than-expected vehicle production, and Lucid having to raise additional capital to keep the lights on, selling the stock looks like a legitimate move.

The case for holding Lucid

As with all decision-making, doing nothing is always the easiest option. But I do think there's a case for holding your Lucid shares.

Most importantly, the EV market is still in its infancy. Automakers across the globe are only beginning to transition their lineups to electric vehicles, and while it will take time, the market looks to be moving in this direction.

Image source: Lucid.

The big question is whether Lucid can hold on long enough to see the benefit from the transition. Lucid's management says the company has enough "cash runway well into 2026," so there's no real worry there, at least for now.

There isn't much harm in holding your Lucid shares if you have a small position and don't have any other stocks you really want to buy. Just keep in mind that it could be a long wait to see how your Lucid bet plays out.

Is there a case for buying Lucid right now?

I don't see a compelling reason to buy Lucid stock right now. Even with its shares trading around $2.10 (as of this writing), they have a price-to-sales ratio of 6.6. That's far more expensive than fellow EV start-up Rivian, with its P/S of only 2.2.

If the company significantly boosts production in 2025 and narrows its losses meaningfully, then the argument for buying Lucid may change. But for now, investors aren't missing out on anything by not owning this EV stock.

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Chris Neiger has positions in Rivian Automotive. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.