Lucid Motors (LCID) has more room to run despite almost doubling in price over the past month. It outstripped Tesla (TSLA) for the month, according to a Wall Street firm. Lucid stock pulled back from record highs, with Rivian stock poised to debut.
In a note Wednesday, Bank of America analyst John Murphy noted Tesla rose 30% over the past month. Its newest challenger, white-hot Lucid, leapt 90%.
He says that could mean both Tesla and Lucid are “very likely” to raise low-cost capital to fund growth. And that could drive valuations higher.
“Building capacity in the automotive industry is expensive and often generates low returns,” Murphy said. “However, as has proven the case for TSLA over the past decade plus, the higher the upward spiral of stocks for the EV OEMs, the cheaper capital becomes to fund growth,” he said. And that is then rewarded by investors with a higher stock price.
The analyst rates Lucid stock a buy and doubled his price objective (PO) to 60. He rates Tesla stock at neutral, hiking his PO to 1,200 from 1,000.
By comparison, he thinks Fisker (FSR), another EV stock on a tear, is “somewhat likely” to raise low-cost capital. He also rates Fisker at neutral, while raising his PO on the stock to 24 from 18.
Lucid, which debuted in July after a reverse merger, will make its first report as a publicly traded company late Monday.
Milestone For LCID Stock, Rivian
In the past month, Lucid stock emerged as the hottest EV stock. It outstripped Tesla after starting deliveries of the Air luxury sedan, its first electric vehicle.
Rivian Automotive, set to debut Wednesday under the ticker RIVN, after a blockbuster, upsized IPO, has also begun delivering its first EV, the R1T electric truck.
The start of deliveries marks a milestone moment for any EV startup, many of which fail to get off the ground.
LCID stock jumped even earlier in September. That came after the Lucid Air was confirmed as the longest-range electric car. It delivers 520 miles on a single charge. Rivian’s R1T truck delivers 314 miles on a charge.
Longer electric-driving range is a key to boosting the adoption of electric cars.
Lucid Stock, EV Stocks
Shares of Lucid Motors dropped 4% to 42.84 on the stock market today, after setting a fresh intraday high Tuesday. Lucid stock is far extended from a 28.49 buy point off a cup-with-handle base, according to MarketSmith chart analysis. That means shares are not in buy range.
Tesla stock rose 3% Wednesday, snapping a three-session slide. That decline came after CEO Elon Musk remarked in a Twitter post that he is selling shares.
Fisker, whose first EV, the Ocean SUV, is poised to go into production in November 2022, fell as much as 1.7% before recovering somewhat in afternoon trading.
In his analysis, Murphy said a 10% dilutive equity raise for TSLA could fund 40-plus incremental plants and 10 million-plus units of capacity, “which would make TSLA effectively the largest global automaker.”
As for Lucid, a 10% dilutive equity raise could fund three-plus incremental plants and 750,000-plus incremental units of capacity, making it “a relatively large” global luxury-auto maker.
As a result, “we do not believe the capital markets are as supportive in funding accelerated growth until that hurdle is cleared,” he said.
Find Aparna Narayanan on Twitter at @IBD_Aparna.
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