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TSLA vs Lucid, which is the better electric car stock to invest in?
Key Metrics for TSLA and Lucid
My analysis of the latest metrics for and concludes that Tesla is performing significantly better than Lucid.
On April 2, 2023, Tesla issued a press release stating that the company's deliveries reached 422,875 units in the first quarter of the year. This means that Tesla's deliveries in the most recent quarter were up 36% year-over-year and 4% year-over-year. More importantly, Tesla's actual deliveries for the first quarter of 2023 were 0.4 percent higher than the market's general expectation of 421,200 units.
In an effort to boost customer demand, Tesla made several price adjustments in the first quarter of 2023, as highlighted in a Wall Street Journal article published in early March 2023, Tesla lowered the prices of its Model X and Model S models sold in the U.S. this month by between 4 and 9 percent. This comes after Tesla had already reduced the price of the Model 3 and Model Y SUVs once in January of this year.
At the company's 2023 Investor Day on March 2, Tesla emphasized that it "has found that even small changes in price can have a significant impact on customer demand." In other words, Tesla believes the price cuts have had a positive impact on its future sales, and that the company's pricing strategy has been validated by higher-than-expected sales.
In contrast, Lucid's latest metrics have disappointed the market.
Lucid previously revealed in late February that its deliveries for the fourth quarter of 2022 were 1,932 units, which was 32 percent lower than the 2,831 units widely forecast by sell-side analysts. Another key metric for Lucid is the reservation numbers. As of today, Lucid's bookings have declined from more than 37,000 units in August 2022 (equivalent to $3.5 billion in potential revenue) and more than 34,000 units in November 2022 ($3.2 billion in potential revenue) to more than 28,000 units in February 2023 ($2.7 billion in potential revenue). It is worth noting that Lucid has decided that it will not be releasing reservation figures in the future.
Lucid gave guidance of between 10,000 and 14,000 units for fiscal 2023, well below the 28,000 units it had as of February of this year, suggesting the company may still be suffering from supply chain headwinds. At its Q4 2022 earnings meeting, Lucid acknowledged that it was "unable to deliver stealthy exterior configurations due to "supply chain issues, which resulted in lower bookings in the first quarter of 2023.
Considering Lucid's latest metrics, Beast Finance believes Lucid is facing challenges on both the demand and supply sides.
Key differences between Tesla and Lucid
I think the main difference between Tesla and Lucid is that the former has a scale advantage over the latter. Tesla's scale enables it to be consistently profitable and free cash flow positive, which in turn provides Tesla with aggressive pricing power.
Tesla's FY2022 revenue is $81.5 billion, while Lucid's revenue for its most recent fiscal year was only $608 million. As noted earlier, Lucid has issued guidance for its 2023 bookings in the range of 10,000-14,000 units and stated in its fourth quarter 2022 earnings report, released on January 25, 2023, that its bookings for the year are a fraction of Tesla's 1.8 million units.
Tesla generated $7.5 billion in free cash flow and $12.5 billion in GAAP net income for the full year of fiscal 2022, respectively. By comparison, Lucid reported a GAAP net loss of $2.6 billion and negative free cash flow of $3.3 billion last year. According to S&P Capital IQ's sell-side financial forecasts, analysts do not expect Lucid's free cash flow to be positive and profitable until 2027 and 2028.
According to the Associated Press on April 7, 2023, Tesla has "cut prices on its U.S. lineup for the third time" in 2023. Tesla also has the financial resources to implement multiple rounds of price cuts because its margins are high enough to withstand the impact of price cuts; and Tesla's GAAP net and free cash flow margins are already at 15.4% and 9.3% in fiscal 2022.
This is not the case with Lucid, which must take prudent price cuts to avoid delaying the timeline for achieving profitability and generating positive free cash flow. To make matters worse, Lucid's Lucid Air does not qualify for a federal tax credit under the sales price standard, which is why the company had to offer a $7,500 tax credit for select models of Lucid Air earlier this year to remain competitive.
As noted earlier, Lucid pre-orders have been declining, so Lucid may have to cut prices further. And Lucid's weak financial position limits the company's ability to compete with competitors on price going forward. in its fourth-quarter 2022 earnings report, Lucid noted that it has enough liquidity to maintain its operations through the first quarter of 2024, suggesting that the company may raise new capital again next year.
Are Tesla and Lucid's valuations reasonable?
According to valuation data from S&P Capital IQ, Tesla's current stock price is 3.20 times its expected enterprise value to revenue in fiscal 2025. On the other hand, the market generally expects Lucid's market value to be 3.08 times its FY2025 enterprise value to revenue. As mentioned earlier, Tesla has better operational and financial metrics compared to Lucid. Therefore, Lucid's valuation premium relative to Tesla should be reasonable. Based on the current expected enterprise value-to-income ratio metrics for both stocks, Mastodon Financial believes Tesla's stock is undervalued, while Lucid's current stock price is reasonable.
How should investors view Tesla and Lucid?
Investors should realize that Tesla is capable of eliminating competitors like Lucid and gaining more market share through an aggressive pricing strategy. Lucid, by contrast, was already unprofitable and burning a lot of money before it made a significant price cut.
Tesla said at its 2023 investor day that it "aims to reduce costs by 50 percent with the company's Next Generation Vehicle platform. Tesla also revealed at an investor event in early March that "the next Tesla megafactory will be in Mexico" and "will produce our next generation of cars". Mastodon Finance believes that Tesla's efforts to reduce the negative impact that recent price cuts have had on earnings by setting spending reduction targets and building a new factory in Mexico (to benefit from lower manufacturing costs) will allow the company to reduce the negative impact that recent price cuts have had on earnings.
And like most of Tesla's competitors, Lucid is now caught in a dilemma. If Lucid cannot remain competitive by lowering prices, then Lucid is likely to lose significant market share. Conversely, if Lucid competes with Tesla by lowering its prices, then its financial position deteriorates further.
What's more, Tesla, with its strong brand loyalty, could steal customers from other brands, including Lucid, simply by closing the price gap with its competitors. According to a study by UBS, "42% of pure electric car customers" ranked Tesla as their first choice, compared to only 18% who would choose Lucid when choosing a pure electric car brand.
Which is the better electric car stock to invest in?
After analysis, I think Tesla is a better investment than Lucid. This is because Tesla is now free cash flow positive, while Lucid may take a few more years to generate positive free cash flow. And Tesla's recent deliveries have also exceeded sellers' expectations, while Lucid's booking and production outlook has disappointed the market. Tesla also has a larger valuation premium compared to Lucid, so we think Tesla is a better investment option compared to Lucid.
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MicroStrategy Q4 2024 earnings conference call
Silverbat : He is taking our money away
Cathbeby OP Silverbat : No, as long as you can catch the trend of the market, analyze the fundamentals and technical aspects of the market, we can make his money from it, instead of letting him make our money, are you currently doing swing or long hold?
Silverbat Cathbeby OP : Not really! It drops unexpectedly, such as Q1 earnings .
Cathbeby OP Silverbat : Yes, its first quarter earnings report is not very good, but the current share price is also maintained at 160-170, has not fallen to the freezing point, tomorrow's TSAL will fall slightly, we do swing attention to the timing of entry
岁月无声_8154 Silverbat : You can also take his money
Cathbeby OP Liam Lee : Yes, it's not just Casey Wood who believes in Musk, many people do. How much TSLA stock do you currently own?