Lucid (LCD -1.88%) Y Nicholas (NKLA -1.92%) Both are electric vehicle manufacturers that went public by merging with SPACs (Special Purpose Acquisition Companies). Both electric-vehicle makers initially painted long-term forecasts rosy during their initial presentations to investors, but quietly rolled back those estimates after their public debuts. As a result, Nikola and Lucid are now trading below their initial post-merger prices. Should investors consider buying either stock at this time?
Can Lucid solve your production problems?
Lucid’s debut luxury sedan, the Lucid Air, can travel up to 520 miles on a single charge, which exceeds Tesla‘s (TSLA) -0.13%) Model S Long Range for over 100 miles. It’s led by Peter Rawlinson, who previously served as Tesla’s chief vehicle engineer from 2009 to 2012. Lucid notably targets wealthier customers than Tesla: Lucid Air starts at $87,400, while the top-tier Grand Touring model starts at $154,000.
Before its merger, Lucid claimed it could ship 20,000 vehicles in 2022. But this February it lowered that goal to 12,000-14,000 vehicles. In August, it cut that forecast in half to just 6,000-7,000 vehicles as it faced “extraordinary supply chain and logistical challenges.”
Lucid ended its last quarter with 37,000 reservations, which could potentially generates up to $3.5 billion in revenue, but only delivered 125 vehicles in 2021 and 1,039 vehicles in the first half of 2022. So Lucid could still struggle to deliver 6,000 vehicles this year unless it ramps up production significantly in the second half. .
Lucid’s AMP-1 plant in Arizona has an annual production capacity of 34,000 vehicles and expects its Phase 2 expansion to increase its annual capacity to 90,000 vehicles next year. However, that increased capacity will be meaningless if you can’t solve your supply chain problems.
Will Nikola be able to regain the trust of his investors?
Nikola produces BEV (battery-powered) and FCEV (hydrogen-powered fuel cell) cargo trucks. Before its public debut, it claimed it could deliver 600 BEVs in 2021, followed by 1,200 BEVs in 2022. It also planned to start delivering its FCEVs in 2023. But in reality, Nikola only shipped its first two BEVs for a pilot program in late 2020. 2021.
Nikola’s founder and former CEO, Trevor Milton, also resigned last year after personally being the target of securities and wire fraud investigations. Nikola’s current CEO, Mark Russell, has tried to distance himself from Milton, and the company also reached its own settlement with the SEC last December, but those allegations could still tarnish his reputation. general motorswhich previously acquired an 11% stake in Nikola and had planned to co-produce a consumer-oriented Badger pickup with the company, also liquidated its entire position and abandoned that project in November 2020.
Nikola delivered 52 BEVs in the first half of 2022 and says it remains “on track” to ship 300-500 BEVs throughout the year. He has received more than 500 BEV orders from him so far, and his Arizona plant currently has an annual production capacity of 2,500 trucks. He expects his Phase 2 expansion to increase that capacity to 20,000 vehicles (over two shifts) by early 2023.
How steep are your losses?
Lucid only brought in $27 million in revenue in 2021, but posted a staggering $4.75 billion net loss. In the first half of 2022, it generated $155 million in revenue, but still posted a net loss of $1.16 billion.
Assuming Lucid can hit its target of 6,000-7,000 shipments, analysts expect it to generate $758 million in revenue, with a net loss of $1.63 billion this year. Lucid still had $3.16 billion in cash and equivalents, along with $1.14 billion in short-term investments, at the end of the second quarter, but it could burn through that cash quickly as it expands. That’s why it recently announced it would raise an additional $8 billion in a mixed offering to strengthen its balance sheet.
Nikola did not generate any significant revenue in 2021, but did rack up a net loss of $690 million. He brought in $17 million in revenue in the first half of 2022, but that’s still down to a net loss of $326 million. He ended the second quarter with just $529 million in cash and equivalents.
If Nikola can hit its delivery goals this year, analysts expect it to generate $111 million in revenue, but still post a net loss of $816 million. That outlook seems bleak, but Nikola plans to keep the lights on by raising up to $400 million in an upcoming stock sale.
The evaluations and the verdict
Both stocks still look expensive after their post-merger declines: Lucid is trading at 37 times this year’s sales, while Nikola is trading at 21 times this year’s sales. Those price-to-sales ratios could cool as their output ramps up, but their continued lags indicate investors should temper their long-term expectations and forget about their pre-merger estimates.
I wouldn’t touch any of these EV stocks right now. But if I had to choose one over the other, I’d go with Lucid because she draws more bookings and her production rates are higher.