KAUST Partnership And Global Electrification Will Expand Luxury Mobility

Key Takeaways

• Lucid's proprietary technology, flexible vertical integration, and new market expansion set it up for faster revenue growth, margin expansion, and outsized luxury EV market share.
  
• Traction in tech licensing, OEM partnerships, and advanced AI collaborations is driving recurring high-margin revenue streams and premium differentiation through innovative offerings.
  
• Ongoing losses, a narrow luxury focus, operational setbacks, volatile input costs, and intensifying competition threaten Lucid's growth, market relevance, and financial sustainability.

Catalysts

A technology company, designs, engineers, manufactures, and sells electric vehicles (EV), EV powertrains, and battery systems.

• While analyst consensus expects ongoing strong unit growth with Gravity and Air models to help drive revenues, the pace of recent deliveries, record order growth, and expansion into new luxury SUV segments suggest Lucid's volume and average selling prices may outperform expectations, accelerating revenue growth and bringing gross margins to breakeven sooner than anticipated.
  
• Analysts broadly agree that vertical integration could help with margin stabilization, but Lucid's real advantage lies in its flexibility to source and manufacture key technologies and battery components in-house, which gives it a unique hedge against tariff and supply chain shocks, providing substantial long-term gross margin expansion and earnings leverage compared to competitors.
  
• Lucid's technology licensing and OEM partnerships-beyond vehicle sales-are gaining increasing traction, and with high-profile deals already in place and ongoing negotiations accelerated by market dynamics, this could unlock recurring high-margin revenue streams and materially boost long-term EPS.
  
• As global electrification and decarbonization trends gain further regulatory and consumer momentum, Lucid's proven proprietary powertrain efficiency, superior range, and early leadership in sustainable luxury EVs position it to capture outsized share of premium demand in both North America and underserved international markets-expanding total addressable market and supporting robust, durable revenue growth.
  
• The recent partnership with KAUST and access to next-generation AI, materials science, and supercomputing capabilities dramatically accelerates Lucid's timeline to deploy industry-leading ADAS and autonomous features, enabling premium differentiation and potential margin uplift through technology-rich offerings that command higher price points and recurring software revenues.

Lucid Group Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Lucid Group compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Lucid Group's revenue will grow by 116.4% annually over the next 3 years.
• Even the bullish analysts are not forecasting that Lucid Group will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Lucid Group's profit margin will increase from -357.2% to the average US Auto industry of 5.4% in 3 years.
• If Lucid Group's profit margin were to converge on the industry average, you could expect earnings to reach $477.4 million (and earnings per share of $0.13) by about August 2028, up from $-3.1 billion today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 61.8x on those 2028 earnings, up from -2.4x today. This future PE is greater than the current PE for the US Auto industry at 17.7x.
• Analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 11.6%, as per the Simply Wall St company report.

Lucid Group Future Earnings Per Share Growth

Risks

• Persistent negative gross margins and ongoing cash burn, as highlighted by a first-quarter GAAP gross margin of negative 97.2 percent and negative adjusted EBITDA of 563 million dollars, raise the risk of further shareholder dilution or the need for additional capital infusions, directly suppressing earnings per share and share price growth over time.
  
• A narrow product lineup focused on high-end vehicles such as the Lucid Air and Gravity, with delayed rollout of the lower-priced Midsize platform until late 2026, leaves Lucid vulnerable in an increasingly crowded electric vehicle market, restricting its ability to expand its customer base and sustain robust top-line revenue growth.
  
• Elevated uncertainty around tariffs, regulatory changes, and commodity price volatility for materials like lithium, nickel, and rare earths, despite mitigation efforts, could continue to erode gross margins and add unpredictability to long-term cost structures, undermining both profitability and operational planning.
  
• Execution risks remain significant, as evidenced by recent production delays and quality-control challenges with the Gravity SUV-such as unresolved software and head-up display supplier issues-that could hamper the pace of Lucid's scale-up and erode investor and consumer confidence, delaying the achievement of positive net margins.
  
• Intensifying competition from major automakers and the potential for sector overcapacity could force aggressive discounting, further squeeze Lucid's margins, and threaten its market share-especially if shifting consumer sentiment or rapid technological change (like alternative battery chemistries) render Lucid's current platforms less relevant, resulting in a negative impact on both long-term revenue and margin sustainability.

Valuation

• The assumed bullish price target for Lucid Group is $5.64, which represents two standard deviations above the consensus price target of $2.67. This valuation is based on what can be assumed as the expectations of Lucid Group's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $7.0, and the most bearish reporting a price target of just $1.0.
  
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be $8.8 billion, earnings will come to $477.4 million, and it would be trading on a PE ratio of 61.8x, assuming you use a discount rate of 11.6%.
  
• Given the current share price of $2.42, the bullish analyst price target of $5.64 is 57.1% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.