Lucid Group (NASDAQ: LCID) stock has risen sharply over the last month, with shares jumping in value by nearly 30%. That’s a big rise over a fairly short amount of time, but don’t think that it’s too late to jump in. If you’re looking for stocks with maximum growth potential, Lucid shares still offer tons of value. But there are some important risks to be aware of.
Lucid Group could grow sales by 70% this year
It takes a long time to get a new vehicle to market. A look at Lucid’s history provides immediate proof. Lucid was originally founded in 2007 under the name Atieva. It wasn’t until late 2021 that it released its first vehicle, the Lucid Air sedan. Even then it was only a limited edition model with minimal production. In total, it took nearly 15 years for the company to go from idea stage to mass production of a single model.
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Of course, when the Lucid Air began shipping to customers, the company’s sales exploded higher, from essentially zero dollars to around $750 million. But then growth began to stagnate. The Air model starts at around $70,000, but the total shipped price with options can often exceed $100,000. That limits Lucid’s total addressable market. After several years of production, Lucid had essentially saturated its potential buyer base, leading to a flatlining in sales growth.
After years of development, however, Lucid released its second model — the Gravity SUV platform — earlier this year. Demand has been promising so far, but there’s a long way to go. Analysts expect 73% sales growth in 2025, with another 96% growth anticipated for 2026, largely fueled by rising Gravity sales. Put simply, Lucid’s sales are about to explode. But before you jump in, there are four risks to pay close attention to.
Image source: Getty Images.
Don’t buy Lucid stock before understanding these four risks
Lucid’s growth should take off this year, with that growth extending heavily into next year. But there are some risks to this thesis.
First, Lucid is running low on capital. The company has less than $1.9 billion in cash yet posted a negative net income last year of more than $2 billion. There’s a good chance that management opts to sell more shares if growth appears strong, diluting the gains for existing shareholders. Second, the company’s longtime CEO recently departed, adding uncertainty to the company’s future. Third, the biggest growth opportunity for Lucid won’t occur until 2027, when several new mass market models — models that are affordable to the masses — begin production. So while growth will be strong in the coming year or two, investors will need to be even more patient to experience the biggest gains. Finally, shares are already pricing in much of this growth, with the stock trading at nearly 9 times sales.
To be sure, Lucid is still a promising growth stock. But the high valuation, management uncertainty, long time horizon, and cash-flow issues reserve shares for aggressive growth investors only. The upside is clear given Lucid’s paltry $9 billion market cap. But as the long list of defunct electric vehicle start-ups attests, the downside risk is clear as well.
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Ryan Vanzo has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
