Lucid Group (NASDAQ:LCID) delivered 3,806 vehicles in the third quarter but built only 2,954. The gap was intentional: the electric-car maker is making fewer cars than it sells so it can work down unsold inventory and save cash, according to its latest production update.
Sales have grown at a pace few automakers ever reach, yet each car still costs more to build than it brings in. The question is whether a new chief executive’s reset can fix that before the money runs low.
The company builds electric cars, including the Gravity SUV, at a plant in Arizona. Sales are rising quickly, but each one still loses money. The shares hinge on a turnaround that hasn’t shown up in the results yet. For investors interested in growth stocks, our list of 13 Best Low Priced Growth Stocks to Invest In Right Now covers more names.
Lucid Grew Fast and Lost Money Doing It
Revenue has grown about 221% a year over the past five years, and the pace hasn’t stopped. Second-quarter revenue reached $405 million, up 56% from a year earlier, and the past 12 months brought in $1.55 billion in sales.
The company, though, has little to show for that growth in profit, with a $4.60 billion loss over the past 12 months. Its gross margin was negative 96.56%, meaning it spends more building cars than it collects from selling them.
Computer with charts
A New CEO Is Resetting the Company
Five years of rapid growth have ended with Lucid building fewer cars, not more. Silvio Napoli, the new chief executive, launched an operational reset when the company reported second-quarter results. The plan targets $1.4 billion in cash improvements this year, mostly from selling down inventory and spending less on equipment and expenses. It also halves the number of executives reporting directly to him.
Bloomberg reported that the company dropped a second shift at its Arizona plant in June, which is why production fell sharply in the third quarter. Napoli said, according to CNBC, that the midsize vehicle would most likely arrive in the second half of 2027.
Ending the second quarter with $3.0 billion in total liquidity gives the plan room, and the company says that is enough to last well into 2027. If you own the shares, that runway is the window the reset has to work in. If you’re looking for more electric-vehicle stocks, check out 10 Most Promising EV Stocks to Buy According to Analysts.
Investors Worry About Demand and Cash Burn
The concern is that the production cut reflects weak demand rather than tidy housekeeping. CNBC reported that third-quarter deliveries fell as the company cut output to match demand. Bloomberg described a carmaker reining in costs while it focuses on selling the cars it already has.
That matters because a company that shrinks output to match sales isn’t yet growing into its factory. Making fewer cars saves cash, but it does nothing for a gross margin that sits deep in negative territory. Investors who want a look at stocks the market is shunning can see our ranking of 10 Stocks Investors Are Running Away From. The reset can stretch the cash, but it can’t make a car profitable on its own.
What the Share Price Is Betting On
There is no earnings multiple to judge, because the company loses money. If you’re interested in undervalued stocks, we recently compiled a report on 10 Best Undervalued Stocks to Buy in October.
So the price rests on whether the reset turns losses around, not on profits earned today. The company said demand for the Gravity SUV continued to regain momentum in the third quarter, though it gave no figures. Owning the stock means owning a bet that costs fall faster than the cash runs out.
Building fewer cars than it sells can stretch the cash into 2027, but that buys time and doesn’t show the cars pay for themselves. The thing to watch is the gross margin in the third-quarter report, due next month: until it climbs out of deep negative territory, every extra sale adds to the loss.
READ NEXT: Nvidia (NVDA): Can Paid Software Make Its Earnings Less Dependent on Hardware Sales? and Verizon (VZ): Can Fixed Wireless Grow Without Squeezing Mobile Network Returns?
This article is originally published at Insider Monkey.
