Why Lucid Group Stock Fell 17% in August

What happened

Shares of Lucid Group (LCID -2.54%) were pulling back last month after the luxury EV maker reported second-quarter earnings. The stock actually gained on the news even though it missed estimates on both the top and bottom lines as it continued to struggle with production challenges and a path to profitability. Still, investors momentarily bid the stock higher on news that it had improved its liquidity and had begun shipping vehicles to Saudi Arabia.

The broader trend pushed the stock lower over the course of the month, and according to data from S&P Global Market Intelligence, shares of the EV stock finished the month down 17%.

As you can see from the chart below, the stock briefly popped on Aug. 8 before resuming the downward trend.

LCID data by YCharts.

So what

In the first week of the month, the company slashed the price of its Air luxury sedans by as much as $12,400 as price competition heated up in the EV sector.

Lucid delivered 1,404 vehicles in the second quarter, bringing in $150.9 million in revenue, which was up 55% from the year before, but missed estimates by a wide margin at $175 million.

The company reaffirmed its goal of manufacturing at least 10,000 vehicles in the year, though the second-quarter delivery numbers indicate the company could be facing demand challenges.

It also raised $3 billion of new capital, including $1.8 billion from Saudi Arabia, which will keep it solvent through 2025. 

The company also won a contract with Aston Martin to supply its electric powertrain and battery and said the production of the Lucid Air Sapphire was on track for mid-September. 

On the bottom line, the company reported a generally accepted accounting principles (GAAP) operating loss of $837.7 million or a net loss per share of $0.40, which missed estimates at a per-share loss of $0.33.

A few days after the report, BNP Paribas downgraded the stock to underperform, citing the threat of share dilution, and the stock languished over the second half of the month.

Now what

While Lucid has won a number of awards for its vehicles and has the longest range of any EV on the market, the company may have painted itself into a corner with its high prices and small scale as it appears to be falling behind in the EV race and is still deeply unprofitable.

If it can continue to raise capital, the company can stay afloat, but it will need to see demand accelerate in order for the stock to be a winner.

Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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