Why This Analyst Believes Lucid Group's Stock Has Raced Ahead Of Valuation

Although Lucid Group Inc LCID features compelling technologies that could scale profitably, its business faces significant competition from both legacy players and startups, according to Morgan Stanley.

The Lucid Group Analyst: Adam Jonas initiates coverage of Lucid Group with an Underweight rating and a price target of $12.

The Lucid Group Thesis: There is significant execution risk at the company, Jonas said in the initiation note.

“Lucid is a highly vertically integrated BEV company that addresses the premium market at Tesla Inc TSLA and above,” the analyst noted.

“However, we find ourselves asking how big is the market for this level of premium EVs and what are reasonable levels of risks that investors should shoulder in order to take what may eventually be only a modest slice of a crowded premium BEV market,” he wrote.

“At a $31bn valuation, the stock market appears to be ascribing an unusually high probability of scenarios where LCID achieves very high market share, margins or both,” Jonas added.

LCID Price Action: Shares of Lucid Group had declined by 5.71% at $18.92 at the time of publication Tuesday.

Photo: Lucid Group