Lucid stock continued its recent recovery, reaching its highest level since April 15, after a Saudi prince bought a large stake in the company, despite bankruptcy and cash burn risks. LCID jumped to $7.90, up sharply from this month’s low of $2.40.
Lucid Group stock jumps as Prince Alwaleed buys stake
LCID stock soared as Prince Alwaleed Talal revealed that he bought a 5% stake in the company when its valuation dropped below $2 billion earlier this month.
This purchase increases the amount of money that Saudi Arabia has invested in the company. Data shows that Public Investment Fund (PIF) owns 177 million shares worth over $1.39 billion, which is equivalent to 45% of the company. The other large holders are companies like Uber, UBS, BlackRock, and Vanguard.
Alwaleed, who owns Kingdom Securities and is a member of the ruling family, has a net worth of $24 billion. He derives his wealth from investments in industries like hotels, aviation, and real estate. His notable stakes include companies like Citigroup, JD.com, and SpaceX. Investing in Lucid is a sign that he expects the company to recover over time.
Lucid Group faces some major risks ahead
Still, despite the investment, Lucid Group faces some major risks ahead, which explains why its short interest has jumped to 16.3%. Just recently, a popular electric vehicle blog noted that the company was prepared to file for bankruptcy, a statement that it denied.
In his statement, Silvio Napoli, the CEO said that it was not considering bankruptcy or going private. He added that the company had adequate liquidity to fund its operations well into next year. Also, he confirmed that Lucid was working with advisors on operational performance and execution.
Lucid’s main challenge is that its business is burning cash intensely, a trend that will continue in the next few years. The last results showed that the company made over $282 million in revenue and a net loss of over $1 billion. It also ended the quarter with over $700 million in cash and $1.4 billion in inventories.
As the management noted, the company that it has adequate liquidity to push it into next year. This means that it will need to raise cash again either later this year or in 2027. The company has always diluted its shareholders, with its outstanding shares rising to 328 million in Q1 from 303 million in the first quarter of last year.
The next key catalyst for the LCID stock will be the upcoming earnings, which will provide more information about its business. In a recent report, the company said that it produced 4,774 vehicles and delivered 3,953.
Yahoo Finance data shows that the average estimate is that its revenue jumped by 61% in the second quarter to $419 million. For the year, analysts see the company’s revenue soaring by 44% to $1.95 billion.
The average estimate is that its earnings per share worsened to $2.32 in the quarter. Keep note that the company has missed its earnings estimate has missed in the last four consecutive quarters.
What next for the LCID stock?
The options market remains bearish on the LCID stock. For the options expiring after its earnings, the company has a put/call open interest ratio of 2.17, a sign that there are more puts than calls. In most case, this ratio means that many investors anticipate that the stock will retreat.
At the same time, the stock has an implied volatility of 146%, a sign that the market anticipates it to make some big moves.
LCID stock chart | Source: TradingView
Technically, the stock has just crossed the 50-day moving average, a sign that bulls are in control for now. Therefore, the stock may see some more dip-buying in the near term. However, this is not a sign that a new bull run is starting as the company will be highly volatile.
The post Lucid stock jumps 20% as Saudi billionaire prince buys the dip: what next? appeared first on Invezz
