A piece of financial engineering, plus an analyst’s price-target cut, put the brakes on the stock.
It didn’t seem like many investors wanted to hop into the driver’s seat with Lucid Group (LCID -4.11%). The maker of high-end electric vehicles (EVs) saw its share price dive by more than 4% on the day, as a reverse stock split took effect after market close, and an analyst made a bearish adjustment to his take on the company.
By comparison, the S&P 500 was in better form, with a decline of only 0.6%.
Time to split
It’s tough to be bullish on a company just before a 1-for-10 reverse stock split kicks in. As this happened late Friday afternoon, Lucid stock felt like a title best avoided. After all, reverse stock splits usually occur when a company’s equity has traded consistently below minimum exchange-listing requirements. That’s the case with Lucid, and it wasn’t pleasant to be reminded of the situation.
Image source: Getty Images.
Given that, it was a bit surprising that only one analyst became notably more pessimistic about Lucid’s future. This was Stifel‘s Stephen Gengaro, who before market open chopped his price target to a post-slipt $2.10 per share from his previous $3.00. He isn’t losing all hope for the company, however, as he left his hold recommendation unchanged.
Gengaro made his move in consideration of Lucid’s second quarter results and update, according to reports. Although the company slightly edged past the analyst’s estimate for revenue, the company’s gross profit and non-GAAP (adjusted) earnings before interest, taxes, depreciation, and amortization (EBITDA) missed the mark. On top of that, Lucid reduced its production guidance for this year.
Funds wanted
More positively, Gengaro waxed bullish about Lucid’s cutting-edge technology and considers its foundational Air sedan and the soon-to-be introduced Gravity SUV to be fine products. Yet given the state of the company’s finances, it will surely need to raise additional capital in the coming years.
Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
