Lucid Group stock price remained under pressure this week as it crashed to the lowest level since September 8. LCID has plunged by 28% from its highest point in September and by 50% from the year-to-date high as challenges remain.
The stock has also formed the risky descending triangle pattern, pointing to more downside in the near term.
Lucid Group is facing major challenges
Lucid, a Saudi Arabia-based company seeking to challenge Tesla, is facing major challenges that have seen its market capitalization drop from over $112 billion in 2021 to the current $5.
The company’s main challenge is that it continues to burn substantial sums of money. Its results showed that the net loss stood at about $855 million in the second quarter, up from $790 million in the same period last year.
The company’s net loss in the first half of the year improved to $1.47 billion. These losses mean that the company may need to keep raising money and diluting its shareholders. Its outstanding shares have jumped from 20.7 million in 2021 to 307 million.
Recent reporting showed that the company may be preparing to raise money despite reaching a $300 million deal with Uber for its robotaxi business.
The company is also facing major challenges, including the recent ending of the $7,500 EV tax credit by the Donald Trump administration.
Ending this tax credit will likely lead to higher sales in the third quarter and then they will start moving downwards as EVs will now become more expensive than ICE vehicles. This explains why the company’s revenue rose to $259 million, up from $201 million in the same period last year.
Additionally, analysts are optimistic that the rush to buy EVs before the end of the expiry will push its revenue higher. The average revenue estimate for the third quarter is $379 million, up by 85% from the same period last year.
Analysts also expect the current quarter’s revenue rose by 93% to $452 million, bringing the annual revenue to $1.29 billion. It will then make $2.52 billion in the following year. It is unclear whether the company will achieve this growth after the end of the tax credits.
On top of this, the company will lose the high-margin revenue in the form of clean energy reimbursement from other automakers like General Motors and Ford.
Still, there are potential catalysts that may push its stock higher in the coming weeks or months. One of the risks is that the company has a short interest of 12.80%, higher than other companies.
This means that the company may have a short interest of 12.8%, meaning that it may have a short squeeze as companies like Beyond Meat and Opendoor.
Lucid Group stock price technical analysis
LCID stock price chart | Source: TradingView
The daily timeframe chart shows that the LCID stock price has remained in a tight range in the past two years. It has remained below the 50-day and 100-day Exponential Moving Averages, a sign that bears are in control.
Lucid Group stock price has formed a descending triangle pattern, which is characterized by an horizontal line at $17.27 and a descending trendline. The descending connects the highest swings since December 2023.
Therefore, the pattern points to more downside in the coming days. This sell-off will be confirmed if it moves below the lower side of the support level.
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