The battle for electric vehicle supremacy is heating up. Heading into the quarter, one of the main questions investors want to know is whether luxury EV maker Lucid Group (LCID) has lasting power. The market also wants to see whether the company's decision to enter the EV pricing war, sparked by Tesla (TSLA), has generated more demand for Lucid vehicles. These questions will be revealed when the company reports first quarter fiscal 2023 earnings results after the closing bell Monday. While Tesla’s series of price cuts has sparked both record vehicle production and deliveries, that hasn’t been the case for Lucid, which has been selling less expensive versions of its Air sedan.
The company recently announced its Q1 production and deliveries results which fell short of Wall Street expectations. For period that ended the March, Lucid produced 2,314 vehicles at its manufacturing facility in Arizona, while delivering 1,406 vehicles. These Q1 figures barely grew from what Lucid provided in Q3 of 2022. Lucid has already struggled generate positive operating cash flow, and is currently utilizing the cash on its balance sheet to fund its operations. After burning through roughly $3.3 billion in 2022, Lucid ended Q4 with over $4 billion in cash on the balance sheet.
To better capitalize the company, its management announced a restructuring effort, including an 18% reduction in its workforce, or about 1,300 employees. This process, which will cost some $30 million in charges, is expected to be completed by the end of Q2. One of the main initiatives for 2023 is to ramp up production and deliveries. How will the restructuring impact these goals? The stock is down near 60% over the past year, while the S&P 500 index has traded flat. On Monday the company will need to outline how it can achieve its growth objectives and do so profitably.
For the three months that ended March, Wall Street expects the Newark, CA.-based company to post a per-share loss of 41 cents on revenue of $209.88 million. This compares to the year-ago quarter loss of 37 cents per share on revenue of $57.67 million. For the full year, which ends in December, the loss is projected to be $1.56 per share, while full-year revenue of $1.31 billion will rise 116% year over year.
Those are certainly solid revenue growth projections for the quarter (263%) and full year (116%). The company’s critics, however, consistently points out the fact that Lucid remains unprofitable compared to its larger rival Tesla. As of the fourth quarter, Lucid was still losing money on every vehicle it delivered, posting gross margins of -138.8% and EBIT margins of -290.9%. This fundamental issue, among others, highlight why shares are still down more than 64% from their 52-week high of $21.78. Investors, nonetheless, wonder if it is too early to bail on the company.
In the fourth quarter, the company reported revenue of $257.7 million. While this number was up near 900% above last year’s mark of $26.4 million, it still missed street estimates by almost $16 million. The soft revenue was due to, among other things, lower demand. What’s more, the cost of revenues was more than $615 million, which, when compared to the revenue total $257.7 million, suggests challenging economics. This led to rising Q4 operating losses of close to $750 million, up more than 54% year over year.
Will these numbers improve in Q1? As with other EV companies, Lucid’s ability to grow its manufacturing capacity is critical to its success. But if its management on Monday can instill optimism that growth and profitability can be achieved in the quarters ahead the stock may climb higher.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
Richard Saintvilus
After having spent 20 years in the IT industry serving in various roles from system administration to network engineer, Richard Saintvilus became a finance writer, covering the investor's view on the premise that everyone deserves a level playing field. His background as an engineer with strong analytical skills helps him provide actionable insights to investors. Saintvilus is a Warren Buffett disciple who bases his investment decisions on the quality of a company's management, its growth prospects, return on equity and other metrics, including price-to-earnings ratios. He employs conservative strategies to increase capital, while keeping a watchful eye on macro-economic events to mitigate downside risk. Saintvilus' work has been featured on CNBC, Yahoo! Finance, MSN Money, Forbes, Motley Fool and numerous other outlets. You can follow him on Twitter at @Richard_STv.
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