Lucid trying to ‘go to more affordable range’ in limited luxury EV market: Analyst

RF Lafferty & Co. Senior Research Analyst Jaime Perez joins Yahoo Finance Live to discuss Lucid's position in the EV market.

Video Transcript

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- All right. Shares of Lucid trading down more than 9% after reporting fourth quarter earnings. Let's take a deep dive into the company's latest financial report with Jaime Perez. RF Lafferty and Co Senior Research Analyst. Nice to see you, sir. So needless to say, disappointing numbers. What jumps out to you?

JAIME PEREZ: Well, the deliveries were a little weak. They produced about 7,200 vehicles this year, but it delivered 4,400. So that's about 60% of cost they produced, of deliveries. So that's sort of the weak. And they missed revenues by 60 million. So we could see a little bit of a change of mix from the high end to more modest cars because Lucid is a high end luxury EV. But I'm not too concerned about this quarter. I'm really concerned about the production number for 2023, which up between 10,000 and 14,000.

- Yeah, Jamie, about that production number. What were you hoping to see? And in terms of the issues that they are having with delivering their vehicles, certainly Lucid has been struggling with bottlenecks, quality control issues. Where does that stand from your checks?

JAIME PEREZ: Right. Well, last year they estimated about 20,000 vehicles. So they cut their production guidance last year. So this year it's a little bit significantly trimmed down. You expected in the 20,000 run rate. But I think what they're trying to do is maybe achieve a more doable number given supply constraints.

So guidance between 10,000 and 14,000. It's pretty good. Not great like somewhere like Tesla, which is the benchmark. But you know, first ought to be producing within the last couple of quarters. It's pretty good. But we expect a little bit more.

- That 23 number does not include the 100,000 cars that will be a part of that Saudi Arabia agreement. Where do you feel that public investment fund situation is headed? Are we taking that company private? I think they own what, 55%, 60% right now. Where do you believe that's headed?

JAIME PEREZ: Well, I think once-- I think Lucid is going to build out the whole plant and build out the brand. And I'm not sure whether Saudi Arabia fund is going to buy them outright. But we know that Saudi Arabia wants to divest away from fossil fuel and more into EV. So this goes along with this strategy on expanding into the EV market. So I think the probability of expanding further is huge.

- Yeah, Jamie where do you think Lucid stacks up here in terms of competition? Obviously the number of vehicles that they produce deliver a fraction of what some of its competitors are doing. How are they going to compete given that disadvantage that they're at? And then also the fact that they're offering their own price cuts their own $7,500 credit for just a couple of vehicles.

JAIME PEREZ: Right. Remember, they are-- Lucid cars are premium vehicles. So they started about $72,000, could head up to $150,000. So it's a different market from Tesla, who is more consumer driven. This is more for the luxury buyer. So there's probably not a large EV buyer for the luxury market, but the company is trying to go to more affordable rates. So I think that's pretty much the strategy. And I think the downfall is what we should hear a little bit more about the go to market strategy as far as advertising and getting the vehicle out to the public.

- What's your biggest outstanding question for the call? And do you expect your price target will remain?

JAIME PEREZ: Yeah, I think the price target will remain. Like I said, I want to see a little bit here about a little bit more of their go to market strategy. They've been open up studios. Not really advertising. They want to get their cars out to create an ambience. And once the product is out I think we should see a little bit of ramp up in the map. But also remember they gave $7,500 in tax credit for certain models, which should help out in the first quarter and with revenues. But let's see if that continues going forward.

- All right. Stock off just over 8% here in extended trading. Jaime Perez, thanks so much.