After the bell on Tuesday, we received third quarter results from the electric vehicle manufacturer Lucid (NASDAQ:LCID). The company has suffered one of the biggest disappointments in this space so far this year, having reduced its production forecast repeatedly. The latest set of results was not very good, which made me wonder if this stock is headed for single digits.
For the quarter, Lucid announced revenue of $195.5 million. While this was a quarterly record as the company is just starting to ramp up deliveries, the number missed street estimates by just over $200 million. This is the company’s fifth earnings report since going public, and it has missed street estimates on the top line four times. That’s not a good track record.
Lucid delivered 1,398 vehicles in the quarter, more than double the 679 figures announced for the second quarter of this year. Quarterly production was 2,282 units, more than triple what was seen in the second quarter. In the previous statement, management reiterated its guidance for production of 6,000 to 7,000 vehicles this year, noting that it has demonstrated its ability to reach 300 vehicles in a single week. However, remember that the company was originally ordering 20,000 vehicles this year, so the growth story has been pretty lackluster so far.
One thing that might concern investors is that the company’s reserve count was listed as “more than 34,000” as of November 7. That’s about 3,000 units short of the second-quarter earnings release, and I don’t think the company delivered that many units in that little more than three-month period. So it would appear that some customers have canceled their bookings, which might not be a surprise given the ongoing delays, or perhaps the weakening global economic climate that we are currently seeing.
As it is still a very low volume manufacturer, Lucid is losing a lot of money right now. In the third quarter, the company’s operating loss was more than $687 million, compared to $559 million in the second quarter, despite a sequential increase in revenue. During the first nine months of the year, the company’s operations have lost more than $1.84 billion, which is about $800 million more than in the first three quarters of 2021. A quick look at the current income statement offers no no hope that this company can make an operating profit anytime soon.
With these massive losses underway, Lucid is blowing through a ton of cash. The company burned nearly $860 million in the third quarter alone, more than $35 million from what we saw in the third quarter. Total year-to-date cash burn at the end of September was over $2.36 billion, causing the decline in total cash and investments seen in the chart below. Lucid ended the third quarter with approximately $3.85 billion in cash and investments on its balance sheet, which was expected to fund the company through at least the fourth quarter of 2023.
However, if the results continued to be worse than expected, another capital increase did not seem out of the question when I initially reviewed the third quarter report. Just an hour later, the company announced a $600 million market share offering, along with an additional investment of up to $915 million by Ayar Third Investment, its majority shareholder and sovereign wealth fund affiliate PIF. from Saudi Arabia. With the stock approaching its 52-week low, this dilution will really start to add up. It was certainly a bit strange to see the statement about funding until the fourth quarter of next year followed by the capital raising so quickly.
Lucid shares lost about 10% in the after-hours session on Tuesday, taking the company’s market capitalization to about $20 billion. In my opinion, that is too much for a company at these volume levels, although this is the luxury part of the market, so the selling prices are much higher than those of an average brand. Wall Street seems to like the name, with an average price target of $23, but that figure is down from nearly $43 late last year. Trading just over $12 now, the stock is very close to its 52-week low.
In the end, Lucid’s third quarter report was another disappointment for the luxury electric vehicle maker. Again, revenue fell short of street estimates and bookings appear to be declining, while delivery volumes remain quite low. As heavy losses continue to lead to a significant cash burn, the company announced a capital increase at a time of extreme weakness. With execution on the name continuing to fall short of long-term goals, I could easily see this action in the single digits unless Lucid actually gets its act together in 2023.