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Lucid Motors is dealing with high net losses as the company scales production during its early growth stages.
This is normal for tech companies in the beginning. Focusing on producing a high-quality electric vehicle takes precedence over profits in the short run.
However, many investors are worried that Lucid Motors could go bankrupt and run out of money before the company becomes profitable.
When Will Lucid Become Profitable?
Management believes Lucid Motors will be profitable by 2024 in terms of EBITDA (earnings before taxes, interest, depreciation, and amortization) and generate positive FCF (free cash flow) by 2025.
Free cash flow is the biggest indicator that Lucid Motors can be profitable over the long run. Companies with positive FCF tend to be the largest and most valuable companies in the world such as Apple, Microsoft, and Alphabet.
Tesla’s Positive FCF Achievement in 2019 Led to Its Massive Runup
Tesla is a great example of how achieving positive FCF can lead to a massive increase in stock prices. According to MacroTrends, Tesla reached positive FCF for the first time in 2019 and helped the company attract a ton of new investment capital.
In 2022, Tesla achieved positive EPS for the first time which led up to an eventual 10x in TSLA’s stock price. If Lucid Motors follows in the same footsteps then I believe Lucid Motors could achieve positive EPS by 2026, which is around 4 years from now.
LCID Stock May Soar Once Profitable
Many LCID bears are fearful that the company will go bankrupt and refuse to hold LCID shares through the painful years. The truth is that Lucid Motors holds numberous awards as the best luxury EV on the planet right now.
I don’t believe the company will go bankrupt because the Lucid Air is such a high quality, sought after electric luxury car. Quality trumps all and consumers could increase the demand for Lucid EVs once more Lucid Airs are seen in the wild.
Whales and insitutional investors won’t buy into LCID stock until the company achieves positive FCF and makes a profit. These are the early days for LCID and things could get ugly in the short run.
In the long run, LCID is a once in a generation investment opportunity that could soar once profits start rolling in/
Don’t expect Lucid Motors to be profitable within the next few years. It takes time for the company to improve profit margins, get the cost of batteries down, and generate a profit on each EV sold.
These growing pains are normal for an EV startup. Tesla went through the same problems and now other EV makers such as Canoo and Rivian are experiencing the same cash flow problems.
If LCID bulls can hold the stock through the tough times then you may be able to reap the benefits after 2025.