There is Concern Over Near-Term Demand for EV Maker Lucid Group According to Bank of America

Bank of America predicts weak demand will pressure Lucid Group shares near term, despite a strong long-term outlook for the company.

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As a result of Lucid's disappointing results during the fourth quarter, in addition to its financial guidance and production forecasts, John Murphy downgraded shares of the electric vehicle company to a neutral rating from a buy.

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A disappointing production outlook was specifically cited by Murphy as the reason for the change in sentiment. Bank of America was expecting to deliver 27,000 vehicles in 2023, whereas Lucid was expecting to deliver 10,000 to 14,000 vehicles.

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“LCID pointed out that production is no longer a bottleneck, but that the supply chain still remains a challenge and is making it difficult for it to deliver vehicles to customers with the precise specifications they require,” he wrote.

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“Although we believe this makes sense, we would expect LCID to make a concerted effort to enhance brand awareness in order to keep up with the growing demand,” Murphy stated.

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Murphy still believes Lucid to be one of the best start-up EV automakers in the industry, and despite these challenges, he believes it is better positioned than many of its peers, given the fact that its management team has extensive experience in the field.

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“Even so, we now believe that it will take until 2027+ for LCID to break even on a cash flow and operating basis (prior to 2026) and it will need to raise more capital within a shorter timeframe than we had anticipated,” he wrote.

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Lucid's shares tumbled 10% in pre-market trading on Thursday following Bank of America's downgrade, which came after Lucid reported fourth-quarter revenue that fell short of expectations.

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Lucid's stock has soared more than 46% this year after plunging 82% during the shakeout that occurred in 2022. In addition, the stock was also among the worst performers in last year's Nasdaq-100 index which consists of 100 stocks.

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Murphy also reduced Bank of America's price target from $18 to $10, suggesting shares will remain rangebound from Wednesday's close.