No, Virginia: There can be no Santa Claus for Lucid Group inventory.
Shares of the producer of luxurious electrical vehicles The Lucid Group (LCID 4.00%) jumped 6.4% by 11:40 a.m. ET Wednesday on information that… does not immediately have an effect on Lucid in any respect.
Final evening, a rival electrical automotive maker Rivian Automotive (RIVN 21.11%) introduced that Volkswagen (WATCH -1.60%) giving it a money infusion of $5 billion (in whole over the subsequent three years) and making a three way partnership that can see VW and Rivian be part of forces to provide new electrical autos.
Traders are betting on related information for Lucid.
Does this make sense?
Aside from Saudi Arabia, which nonetheless helps Lucid for now, its greatest worldwide associate is Britain Aston Martin, for which Lucid offers electrical car powertrains. However that relationship — although Lucid describes it as value $450 million — is not doing a lot to make Lucid worthwhile, even after a yr of operation.
Additionally, Aston Martin is definitely smaller than Lucid (about one-quarter the market cap). And in contrast to Volkswagen, which has greater than $53 billion in money on its books, Aston Martin has lower than half a billion — lower than Lucid’s $4 billion.
Given its druthers, I believe that Lucid would have been a lot better related to Volkswagen. However now Rivian has finished it as an alternative.
Must you purchase Lucid inventory?
Traders are doubtless hoping that Volkswagen’s huge funding in Rivian heralds Lucid’s victory in its personal automotive JV. For now, although, it appears Saudi Arabia is usually “it.” With all of the headlines we’re seeing about EV gross sales slowing and EVs turning into much less widespread, white knights of the Volkswagen selection could also be onerous to search out.
Worse information for Lucid, absent bigger associate, the corporate is in dire monetary straits. Its $4 billion in money will not final lengthy at Lucid’s present fee of over $3 billion per yr. In actual fact, with $2.4 billion in debt on its steadiness sheet, Lucid might be in web debt in as little as six months.
No, I do not assume Lucid inventory is value shopping for.
Wealthy Smith has no place in any of the shares talked about. The Motley Idiot positions and recommends Volkswagen Ag. The Motley Idiot has a disclosure coverage.
