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Needham lacks 'faith' in demand, downgrades Lucid to Hold rating

Published Nov 28, 2023 00:36
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Needham downgraded Lucid Group (NASDAQ:LCID) to a hold rating and cut estimates on the stock following the electric automaker’s 3Q earnings report and commentary.

LCID's success hinges on brand enthusiasm fueling demand and enhancing vehicle production at a larger and more efficient scale. The variation in end-demand plays a crucial role in shaping investor confidence regarding production growth and efficiencies.

“We downgrade LCID to Hold, ultimately not having enough faith in near-term demand to drive unit volumes,” analysts at Needham wrote in a note.

According to analysts at Needham, LCID faces different levels of constraint due to demand, leading to the decision to downgrade LCID. This downgrade is attributed to concerns about demand, despite an optimistic outlook on the company’s technological edge compared to competitors and a positive assessment of their newly revealed Gravity SUV.

Aston Martin is paying LCID $457M to integrate LCID’s powertrain and battery technology into their eventual EV lineup.

The agreement between LCID and a traditional automaker to license their EV technology has weakened the trust of analysts at Needham in LCID. At $20k to $30k per vehicle, analysts struggle to see mass market, lower price-point OEMs adopting LCID's technology.

Nonetheless, a licensing deal could bring positive outcomes by strengthening LCID's revenue and margin profiles.

This move comes as LCID aims to boost demand for their Air sedans after reintroducing the LCID brand to consumers, preceding the launch of the Gravity SUV scheduled for late '24.

Shares of LCID are down 0.73% in pre-market trading on Monday.

Needham lacks 'faith' in demand, downgrades Lucid to Hold rating
 

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