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EV stocks Fisker and Lucid: why FSR and LCID are driving in different directions

16:55, 5 August 2022

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Lucid Group reduced production targets for the second time this year, but Fisker appears to be coping with supply-chain challenges

High-end EV makers Fisker (FSR) and Lucid Group (LCID) are trading in opposite directions after quarterly earnings reports showed two very different stories in the race to ramp up manufacturing.

While Fisker appears to be stable and on track to meet full-year production goals, Lucid cut its production targets – for the second time this year.

Fisker (FSR) vs Lucid (LCID): 19 months to date

Chart showing share price performance of both Fisker and LucidSource: TradingView

“The fundamental difference between Fisker and Lucid is Fisker’s asset-light strategy – and they outsource production,” said Redburn research analyst Charles Coldicott. “And Lucid is struggling to put parts in their cars.” 

After market close Wednesday, Fisker reported a $0.39 per-share loss on $10,000 in revenue, topping earnings estimates of a $0.42 per-share loss on $0 revenue. Fisker stock jumped as high as 9.29% Thursday to $11.41 from Wednesday’s $10.44 per share closing price. Lucid, on the other hand, reported a wider-than-expected $0.33 per-share loss on $97.3m in revenue. Lucid stock lost 12.4% Thursday to $18 from Wednesday’s $20.55 per share closing price. 

Fisker Inc. (FSR) stock price

Additional positive news from Fisker’s quarterly earnings included a 24% increase in pre-orders from the previous quarter to over 56,000 units, including a complete sell-out of its 5,000 unit limited-edition Ocean One model, secured by a $5,000 down payment. R.F. Lafferty estimates the potential future revenue just for the Ocean One at $350m, with production currently scheduled to commence in November. 

Fisker also reiterated its full-year operating expenses forecast in the $435m to $500m range, while it had $850m in cash on hand, as of 30 June. 

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Fisker price target reduced, but ‘Buy’ recommendation holds up

R.F. Lafferty maintained its Buy recommendation while lowering its 12-month price target to $17 per share from the previous $21. “The lower forecast reflects headwinds from higher commodity prices throughout 2022,” R.F. Lafferty Senior Analyst Jamie Perez in a note to clients. “By 2023, we expect commodity prices to improve, leading to gross margin expansion in the following year.”

Lucid, meanwhile, reported far less reassuring progress in meeting its production goals. In addition to cutting its 2022 production target to roughloy 7,000 units from 14,000, Lucid reported producing just 679 units of its Air model EV in the second quarter for a full-year 1,405 unit total, lagging even newly revised estimates. Lucid’s initial 2022 production estimates was 20,000 units.

Lucid Group Inc. (LCID) stock price

Lucid spent over $800m in the quarter, raising concerns it would need a near-term liquidity injection – something not easily done on the heels of a disappointing financial report. Lucid currently has $4.60bn in cash on hand, but capital expenditures are expected to increase significantly as production ramps up. 

In fact, Redburn’s Coldicott estimates that at its current spending rate, Lucid will need to access the capital markets in the near term in order to meet early 2023 delivery goals.

“Nobody expects Lucid to be self-funded but it looks like they will have to raise cash before next year,” said Coldicott. “They are about 12 months away from running out of cash. I would look for an announcement sooner rather than later.”

 

Does Lucid face a liquidity squeeze? 

Lucid does have a $266.5m revolving credit facility with Gulf International Bank, and a roughly $1bn senior secured revolving asset-based credit facility with a syndicate of Middle Eastern banks. Lucid also has a 50,000 vehicle purchase order for its Air EV sedan from the Saudi Arabian government over the next 10 years, with an option to purchase 50,000 more. 

“Evidently there is some minimum level of liquidity that the company cannot dip below without dramatic reduction in operations,” wrote Coldicott in a note to clients. “We think it should be able to continue to pursue its growth strategy for the next [nine] to 12 months without having to curtail its plans, but evidently a solution is needed soon.”

Redburn maintained its Neutral rating on Lucid stock, while lowering its price target to $13 from $25 per share. “We made material cuts in our forecast due to near-term supply constraints,” said Coldicott. “Demand is not the problem.”

The expectation, Coldicott added, is that the Saudi Public Investment Fund has invested too much in Lucid to let it fail.

“The Saudi backing is a backstop for liquidity and the feeling is the Saudis will eventually stump up the cash,” noted Coldicott.

“On the basis that Lucid will want to ensure that cash on hand as a percentage of revenue remains in excess of 10%, we estimate that Lucid requires [greater than] $8bn of additional capital for it to reach the point of being self-funding,” wrote Coldicott.  

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