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Why Did Lucid Stock Just Pop?
Key Points
UBS analyst Joseph Spak upgraded Rivian Automotive stock this morning.
Spak sees positive gross margins for Rivian as R2 sales rise.
Lucid's margins remain negative, and it's burning piles of cash.
Lucid Group (NASDAQ:LCID) stock tore 7.8% higher through 10:35 a.m. ET Monday on no particular news of note.
No news about Lucid,that is to say. What there was today was some good news for one of Lucid's biggest rivals in the electric cars space: Rivian Automotive (NASDAQ:RIVN), which is up 10.4% -- and it appears to be helping out Lucid stock, too.
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What's Wall Street saying about Rivian today?
Rivian received an upgrade to buy from UBS analyst Joseph Spak this morning, as StreetInsider.com reports.
Citing a 19% sell-off in Rivian shares over the past month, UBS says it sees a buying opportunity in Rivian stock based on "solid" demand for the company's new R2 electric SUV. As an automotive company with high fixed costs, demand is key for Rivian because the more EVs it sells, the more likely it is to cover its fixed costs and convert revenue into profit. Spak predicts Rivian will see continued positive gross profit margins in Q1 2027, with higher-margin software & services sales helping to drive growth.
What does it mean for Lucid stock?
But here's the thing: Even with a successful R2 launch, Spak warns that Rivian will continue to burn cash and will likely need to sell shares and take on debt to fund its operations through at least 2029. That's where the connection to Lucid comes in.
Like Rivian, Lucid is a perennial cash burner, with $5.1 billion going up in flames over the last 12 months alone. Unlike Rivian, Lucid continues to report negative gross margins, and it has little cash on its balance sheet to offset cash burn -- barely $760 million at last report, according to S&P Global Market Intelligence.
Simply put, Lucid is not Rivian, and even if you agree with UBS that Rivian might be a buy, you should think twice before assuming this makes Lucid stock a buy, too.
Rich Smith 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.