Shares of Lucid Group (LCID) shot 8.8% higher on Tuesday after Morgan Stanley analyst Adam Jonas upgraded LCID stock to a hold rating from sell, but he kept his one-year price target at $3 per share.
With a new management team in place, Jonas told investors in a note, “Lucid has the opportunity to execute an AI strategy leveraging strategic/sovereign partnerships within the context of the urgency to develop onshore manufacturing capacity.”
His hope that the EV maker can use artificial intelligence to boost sales seems a stretch.
Lucid Group is still a wreck. Despite record production and deliveries in the fourth quarter, the luxury EV company is still driving on very shaky ground. It likely benefited from sales being pulled forward due to President Trump’s promise to eliminate industry subsidies and tax credits on purchases and it still generates significant losses despite the year-over-year improvement.
Lucid also has a large number of unsold inventory on dealer lots, making its goal of producing 20,000 vehicles this year a long shot. Well, it might make the vehicles, but with declining EV demand, it likely won’t sell most of them.
Even so, Lucid is not about to go under. The Saudi government is propping up the automaker with cash infusions through its sovereign wealth fund, ensuring it won’t run out of money anytime soon. As the government tries to create an EV industry from the ground up, Lucid no doubt has an extended lifeline available. If the situation grows dire, the Public Investment Fund – already a majority owner of LCID stock – could acquire the company outright.
It doesn’t mean investors should buy into the analyst upgrade. The EV industry is facing substantial headwinds, with falling demand, tariffs, and rising costs the most prominent. At just $2.35 per share even after yesterday’s bounce,. LCID is still a penny stock that should be avoided.
