I'm bullish on electric-vehicle (EV) stocks, and if you're reading this, it's likely that you could be of a similar persuasion.
There's good reason to be optimistic. For one, nearly 60% of new vehicles sold globally will be EVs by 2030. And with the share prices of many EV stocks down over the past 12 months, now is a good time to buy some.
But not all of them are worth your money. The luxury EV maker Lucid Group (LCID 5.20%) has created a very impressive product, but I think buying its stock is a bit too risky right now.
Image source: Lucid.
Here's what's going right for Lucid right now
There are always two sides to every story, so let's start with what's going right. First off, the Lucid Air is a real stunner.
Lucid sells just a handful of different versions of the Air right now, and by many accounts, it's a great vehicle that has lots of appeal. Consumers have taken notice, and the company currently has 34,000 vehicle reservations.
And the Air has caught the eye of auto experts as well. MotorTrend named the Air its Car of the Year for 2022, beating out 24 worthy opponents. That's an impressive award made even more notable considering the Air won it in the very first year of its production.
NASDAQ: LCID
Key Data Points
Lucid delivered 1,398 vehicles in the third quarter (which ended Sept. 30) and produced 2,282 vehicles -- more than three times higher than the year-ago quarter.
Vehicle sales resulted in $195.5 million in revenue, up from just $232,000 in the year-ago quarter (when it had just begun producing vehicles).
And the EV maker is on track to meet its goal of producing 6,000 to 7,000 vehicles in 2022 (although there's an asterisk next to this one, as you will see below).
What's not-so-hot with Lucid right now
While there are some things going well for the company, there's plenty that should also raise red flags for potential investors.
First is the fact that Lucid significantly cut its vehicle production target for this year. The company said in the first quarter that it would produce between 12,000 to 14,000 vehicles in 2022, but now it estimates only between 6,000 to 7,000.
CEO Peter Rawlinson cited "supply chain and logistics challenges" that have hampered its ability to ramp up production.
Image source: Lucid.
But production issues aren't Lucid's only hurdle. The company is also facing rising costs and burning through cash as it tries to grow, which has resulted in operating losses widening by 38% in the third quarter to $687.5 million.
That pushed the company's net loss to $670 million, worse than the loss of $524 million in the year-ago quarter.
It's par for the course for a small EV start-up to lose money, but with production much lower than originally planned and costs rising, it's still a bad combination.
And that leads us to the most recent red flag for Lucid, which is the fact that it announced a new round of stock sales to raise $1.5 billion. Raising more cash so soon after the company went public (in July 2021) should give investors pause.
Could more vehicle sales help turn things around? Sure. But there's not exactly a light at the end of the tunnel, either, considering that vehicle reservations dropped by 8% in the third quarter.
Lucid stock is too expensive
In Lucid's case, I think all the things going wrong with the company now far outweigh what's going right.
For all of the reasons listed above, I don't think the stock is a buy right now. But if you need a little more convincing, consider how expensive it is.
Lucid's shares are trading at a price-to-sales ratio of 34 right now, compared to the EV industry leader Tesla, which has a P/S ratio of just 7.
Lucid has a very long way to go to catch up to Tesla (which produced 365,000 vehicles in the most recent quarter and is profitable). That means investors would be paying a significant premium for a much riskier EV stock.
With the stock's high price tag, the company losing money, and Lucid's vehicle production still trying to find its footing, investors might do better to pass on this EV stock right now.
