Better Buy for 2022: Lucid Group vs. Tesla

With the continuously rising demand for low emission cars, improving infrastructure, and government subsidies for buyers, the global electric vehicle (EV) industry is estimated to expand to $802.81 billion by 2027,  at a CAGR of 22.6%. 

So it’s no surprise that the EV industry, represented by the Global X Autonomous & Electric Vehicles ETF (DRIV), is up 88% in the past two years.

In this article, I am going to analyze and compare two EV stocks, Lucid Group, Inc. (LCID) and Tesla, Inc. (TSLA), to determine which one presents a better buying opportunity for 2022. 

Lucid Group produces and sells electric vehicles, EV powertrains, and battery systems in the U.S. Tesla, which is a pioneer of the EV industry, produces and sells electric vehicles, as well as energy generation and storage systems worldwide. Tesla operates through two segments: Automotive and Energy Generation & Storage.

Click here to checkout our Electric Vehicle Industry Report for 2022

Recent Developments 

On January 12th, Lucid Group announced its plans to build an EV plant in Saudi Arabia by 2026. Earlier in January, the company announced that it had begun expansion to European markets this year. The company has been taking online orders from clients in Austria, Belgium, Denmark, Finland, France, Germany, Iceland, Italy, Monaco, Netherlands, Norway, Spain, Sweden, Switzerland, and the United Kingdom.

On January 31st, Credit Suisse analyst Dan Levy upgraded Tesla to “Outperform” from “Neutral” amid margin improvements and the promising Full Self-Drive features. The analyst believes that the recent price drop provides long-term investors with an attractive entry point. The firm has established a price target of $1,025 for TSLA stock. 

Recent Financial Performance & Analysts Estimates

On November 15th, Lucid Group posted its third-quarter earnings report. In Q3, the company's total revenue decreased 31% year-over-year to $232,000, missing consensus by $1.02 million. This decrease was related to lower sales of battery pack systems and supplies for vehicles. LCID's third-quarter net loss increased 225% year-over-year to $524.4 million. As a result, the company announced GAAP EPS of ($0.43), missing estimates by $0.21. 

However, Lucid Group's liquidity position was notably improved during the quarter due to the closing of the de-SPAC reverse merger + PIPE, leading to $4.8 billion of cash on the balance. Furthermore, Lucid Group has over 13,000 reservations for its vehicles, with around $1.3 billion in expected bookings.

For the next quarter, analysts expect LCID’s EPS to be ($0.30). Besides, analysts forecast that its Q4 revenue should come in at $66.87 million amid the start of the production stage. 

Tesla reported its last earnings results on January 26th. In Q4, the company's overall revenue increased 65.0% year-over-year to $17.72 billion, driven by an 84% year-over-year increase in Model 3 and Model Y deliveries, partially offset by a 38% year-over-year decrease in Model S and Model X deliveries. Furthermore, Tesla successfully topped revenue estimates by $1.08 billion. The EV pioneer disclosed a Non-GAAP EPS of $2.54, beating Wall Street estimates by $0.16. 

Also, the company experienced an improvement in its total automotive gross margin by 648 bps year-over-year to 30.6%, primarily due to the further per vehicle cost (COGS) reduction. In Q4, TSLA's total GAAP gross margin also grew to 27.4% compared to 19.2% as of 4Q2020.

Wall Street analysts expect TSLA's earnings to grow 142.80% in the first quarter of 2022 to $2.26 per share. Moreover, analysts expect that its FQ1 2022 revenue should expand by 70.09% YoY to $17.67 billion. 

Comparing Options Market Sentiment

Taking a look at the March 18th, 2022 option chain for both LCID and TSLA, we can determine options market sentiment by analyzing the open interest levels. In LCID's instance, the open calls/open puts ratio at the $30.00 strike price is 0.03x, showing a heavy bearish options market sentiment. For TSLA, the open calls/open puts ratio at the $950.00 strike price stands at 1.77x, indicating a bullish market sentiment.  

Conclusion 

In my opinion, TSLA, at these levels, is a better long-term buy. The company delivered impressive fourth-quarter numbers and it’s continuing to improve its automotive and gross profit margins due to the cost savings. Its next quarter growth rates look superior as well.  Also, the company recently received a favorable upgrade from Credit Suisse. Finally, TSLA has a solid medium-term options market sentiment.   

LCID shares were trading at $27.71 per share on Wednesday afternoon, down $2.25 (-7.51%). Year-to-date, LCID has declined -27.17%, versus a -4.04% rise in the benchmark S&P 500 index during the same period.

Oleksandr Pylypenko has more than 5 years of experience as an investment analyst and financial journalist. He has previously been a contributing writer for Seeking Alpha, Talks Market, and Market Realist.

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