The stock of Lucid Group(NASDAQ: LCID) hasn't traded above the $5 mark since 2023. It's not entirely the electric-vehicle (EV) company's fault. Growth rates have been consistently positive, and analysts expect even more growth in 2025 and 2026 thanks to new model releases. In fact, there's a good chance the company nearly doubles its sales this year, with even more growth anticipated in the years that follow.
This looks like a great opportunity to buy into an exciting growth stock at a discount. I wouldn't be surprised to see Lucid earn a significantly higher valuation in the future. But there are some serious risks to acquaint yourself with before jumping in.
Lucid Group's potential is very exciting
Few stocks have the potential to grow their sales base as much as Lucid does over the next few years. In 2025 alone, revenue is expected to jump 75%, though estimates from earlier in the year called for more than 100% growth. Either way, that's far higher than what EV competitors like Tesla and Rivian are expected to achieve.
Lucid's projected growth is based on the recent introduction of its Gravity SUV platform, essentially doubling its lineup. Tesla and Rivian aren't expected to make any major new product introductions this year -- at least any that are expected to be shipped to customers over the next six months.
There are many things an EV stock can do to garner the respect of the market. Achieving positive gross margins, for example, can prove to investors that management can produce and sell its cars at a profit, even if total net profits remain negative during periods of growth and heavy investment.
But by the far the best thing an EV marker can do is get mass market models on the road -- models that are much more affordable than the luxury lineup that most EV makers start with.
Right now, very little competition exists in the U.S. for affordable EVs. Tesla has the Model Y and Model 3, both of which have starting prices under $50,000. Out of around 1.8 million vehicles Tesla sold last year, roughly 1.7 million were either the Model 3 or Model Y, attesting to how crucial mass market vehicles are to an EV manufacturer's growth potential.
Rivian has no vehicles priced under $50,000. Neither does Lucid. But that could change in 2026 when Lucid's management expects to unveil three new mass market vehicles, all priced below the crucial $50,000 threshold.
Despite a struggling stock price, Lucid could arguably be entering its biggest multiyear growth sprint in its history. Sales of the Gravity will buoy revenue growth in 2025 and early 2026, while new product introductions could put that growth into overdrive in the back half of 2026 and 2027. Even at 8 times sales, it's not hard to see Lucid justifying its premium valuation over time, just as long as the company can avoid a cycle of doom -- a vicious circle in which a negative event triggers another event, which in turn makes the first problem even worse. The end result is a greatly weakened stock and company.
Image source: Getty Images.
Can this EV maker escape the cycle of doom?
More than 30 electric vehicle start-ups have gone bankrupt over the past decade alone. It takes a huge amount of capital to get vehicles to market starting from scratch. And with the recent departure of its longtime CEO, Lucid faces an uncertain future, even if management is guiding for the release of new models sometime in 2026.
Lucid simply does not have enough capital to realize the full potential of its dreams for mass market vehicles. The company only has $1.6 billion in cash on its balance sheet, yet its net income over the past 12 months was negative $2.4 billion. To plug the gap, the company has been selling more stock, pushing down the long-term share price despite consistent top-line growth.
The biggest risk to the company right now is that it will run out of cash before launching its mass market vehicles that would transform the company's long-term growth potential. That's the doom loop scenario. And even if it does raise the necessary cash, it's possible that the funding is so dilutive to existing shareholders that investors don't come out on top in the end.
Lucid's future is very bright based on its potential growth trajectory, but a lack of affordable funding could wreck the entire investment thesis. The upside potential still makes Lucid a fit for very aggressive growth investors with long time horizons. But most investors should stick to the sidelines.
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Ryan Vanzo has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.
