Lucid Group Earnings Preview: More supply headwinds likely but is LCID stock set for a rally?

Lucid Group reports earnings after the close of markets on Thursday. Investors will be nervously watching the earnings and post-earnings conference call for more signs of production issues. Last time out, Lucid lowered its production forecasts for the remainder of the year and LCID stock collapsed.

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Since then, the global macro environment has deteriorated even further, but more importantly, the supply chain environment for global auto manufacturers has also considerably worsened. LCID holders will be fearing the worst. This put the risk-reward in favor of the upside in our view. Any reaffirmation of guidance or positive commentary will be met with a relief rally. The bad news is largely priced in.

Lucid Group (LCID) stock news: EV supply is the key figure

Lucid is set to report earnings per share (EPS) of $-0.30 and revenue of $53.43 million. Current lowered guidance from the last quarter has 2022 production at 12,000 to 14,000 vehicles. This is the key release of the earnings report. Lucid is early stage so is not expected to show anything dramatic in terms of revenue or profitability. The issue revolves solely around supply.

For now, EV demand remains strong and will continue to increase in the face of ongoing rises in the running costs of traditional diesel and petrol vehicles. Tesla's last earnings showed demand was huge with only a few days of inventory. But it too faced supply chain issues.

Lucid has attempted to overcome supply issues with the construction of a new factory in Saudi Arabia. The Saudi Public Investment Fund is of course the main shareholder in Lucid. The Saudi government recently placed an order for 100,000 electric vehicles from Lucid over the next ten years. 50,000 initially with an option for an extra 50,000. That is a nice boost but Lucid must be able to demonstrate it can ramp up production in the current environment to meet demand. As of yet, we see no evidence that it will be able to do so in the current environment. Since its last warnings and slashing of production things have deteriorated even further. 

Lucid (LCID) stock forecast: Bear-market rally to come

The chart below shows us the clear downtrend is the dominant theme for LCID stock. This set of earnings coupled with the imminent Fed 50bps interest rate rise is unlikely to change that any time soon. This is high-growth, high-risk investing which is unlikely to find favor any time soon.

However, as mentioned above we do see the bad news largely in the price, so a bear-market rally is the most likely outcome of this earnings report. That will not be enough to turn the longer-term trend around, though. 

LCID stock chart, daily