Dramatic Drop in Lucid Group's Stock by 33% since July - Identified Root Cause
In a significant development, Lucid Group, a leading electric vehicle manufacturer, has announced a deal with Uber Technologies for a $300 million investment. This investment, announced on July 17, marks a strategic move for both companies as they aim to capitalise on the growing robotaxi market.
The deal sees Lucid supplying 20,000 SUVs to Uber over the next six years for its robotaxi division. In return, Uber will invest $300 million into Lucid Group. However, it's important to note that the value of this investment falls short of what Lucid typically loses in a single quarter, raising concerns about the company's ongoing net losses.
Despite the initial market excitement, Lucid's stock price has since depreciated, trading below $20 per share today. Factors contributing to this depreciation may include Lucid's high valuation with a price-to-earnings ratio (P/E) expected at 36 for 2025, combined with a lack of profit growth, which investors perceive as overvaluation. Additionally, Lucid has been selling more and more stock to cover its losses, diluting shareholders in the process.
It's worth mentioning that the global robotaxi market could be worth as much as $10 trillion, offering a significant opportunity for companies like Lucid and Uber. However, there's no guarantee that Lucid will maintain the capital power necessary to deliver on its end of the deal. The long-term nature of the deal could provide upside opportunity, but it also raises questions about Lucid's financial stability and profitability.
Interestingly, Lucid was not included in The Motley Fool's latest top 10 list with Stock Advisor. The Motley Fool's Stock Advisor analyst team has a track record of identifying successful investments, having previously identified stocks like Netflix and Nvidia that have produced significant returns.
The robotaxi service is expected to begin "late next year", offering a potential boost to both companies. However, with Lucid posting a net loss of $539 million in the last quarter and over the past five years never posting a positive quarterly profit, investors will be watching closely to see how this partnership unfolds.
Despite the challenges, the deal between Lucid and Uber presents an interesting opportunity in the rapidly growing robotaxi market. As always, investors are advised to do their due diligence before making any investment decisions.
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