One highlight of January’s Consumer Electronics Show (CES) was the unveiling of the partnership between Lucid Group Inc. (NASDAQ: LCID) and SoundHoundAI Inc. (NASDAQ: SOUN). The partnership will integrate SoundHound's Chat AI into a proprietary Lucid Assistant.
The announcement was made in early January, but CES was the first time consumers and investors got to see the partnership in action.SoundHound’s technology will allow the Lucid Assistant to respond to the prompt “Hey Lucid” in the same way that consumers interact with Google’s Alexa or Apple’s Siri.
In addition to controlling critical features, the technology will contain all the information in the owner’s manual, which can give drivers information about virtually every aspect of the vehicle’s functionality.
This announcement, coming on the heels of the company’s launch of the Gravity SUV, its first offering in this arena, has been enough to push LCID stock up 17.4% in the 30 days ending on January 14. However, with the stock now bumping up against the high end of analysts’ estimates, investors may have to wait until the company’s upcoming earnings report in February for better direction.
Lucid Faces a Significant Barrier to Scalability
Lucid has cleared an important bar by bringing its EVs into production. The company stands out among automotive stocks for its blend of luxury and sustainability. Through the first three quarters of its 2024 fiscal year, the company is on pace to deliver record sales and delivery numbers. Deliveries outpacing production can be taken as a sign of growing demand.
However, the next hurdle is proving it has an audience that allows for scalability. That one won’t be as easy to clear. Lucid will produce a total of around 9,000 vehicles in 2024. The good news is that it will beat its forecast. The caveat is that the number speaks to the premium price and narrow niche a Lucid vehicle commands.
Lucid operates in the luxury EV sector. According to Mordor Intelligence, the luxury EV market will be valued at $249.91 billion in 2025 and is expected to grow at a compound annual growth rate (CAGR) of 19.5%. That puts the estimated market size at $609.1 billion by 2030.
For context, if Lucid’s Q4 revenue is around the same $200 million it generated in Q3, the company will have full-year revenue of around $775 million. That’s about 3% of the entire market at a time when Lucid is still unprofitable. However, analysts are projecting the company to generate revenue of approximately $1.6 billion in 2025, which highlights the company’s firm footing in the luxury EV market.
What to Watch for Before Investing in LCID Stock
Lucid may have an uphill road to profitability, but there are some reasons for optimism. First, the company has firm backing from major investors such as the Saudi Arabian Public Investment Fund (PIF).
This has helped Lucid increase its total liquidity to over $5.16 billion. And with capital expenditures in 2024 totaling approximately $1 billion, the company should be on solid footing until 2026. At that time, Lucid plans to launch a mid-size SUV that the company estimates will have a price tag of around $50K.
In the meantime, the company will have to prove that it can improve its operating margins. To clarify, the company may not turn a profit soon, but it must convince investors that profitability matters without further diluting LCID stock, as seen in October 2024, when shares hit a 52-week low.
The EV revolution is real, with vehicle numbers set to grow as battery technology and infrastructure improve. However, optimistic projections alone don’t justify owning LCID stock.
For that, you’ll need the conviction that this $8.9 billion company will be able to become profitable or perhaps license some of its technology to generate more revenue, as in the case of Rivian Automotive Inc. (NASDAQ: RIVN). The company has openly expressed its willingness to do that, but it has to find a willing partner.
