Lucid’s 440% Jump Draws Tepid Interest From Street Analysts

(Bloomberg) -- Lucid Group Inc. has become a darling of retail traders during this year’s 440% climb. Wall Street analysts, though, are a different matter.

The third-largest U.S. electric-vehicle startup, which now commands a bigger market value than Ford Motor Co., is covered by only three Wall Street analysts, according to data compiled by Bloomberg. That makes it the least covered stock after Berkshire Hathaway Inc. among U.S. companies with a market capitalization of more than $70 billion. Even among EV startup peers, Lucid sits at the bottom of the table.

One explanation for Wall Street’s near-silence around Lucid is a lack of interest from institutional investors, said Erik Gordon, a professor at the University of Michigan Ross School of Business.

“The analysts aren’t there for the retail traders,” he said in an interview. “Analysts are expensive. To put an analyst on a company, you have to believe that the analyst’s report can be used by your sales and trading people to get your institutional trader to trade the stock. You don’t just follow it just because it’s an interesting company.”

Another reason for the lack of interest to initiate research is the way Lucid went public. The company listed through a merger with a special purpose acquisition vehicle, commonly known as a SPAC, and an alternative to a traditional initial public offering. While mergers involve a small number of investment banks, traditional IPOs tend to enlist legions of underwriters who follow-up with analyst research within a month of the debut.

“If your firm wasn’t involved in the transaction, it may not be a priority to pick up coverage,” said David Erickson, former co-head of global equity capital markets at Barclays Plc and now a lecturer at the University of Pennsylvania’s Wharton School.

Recent developments in Lucid might change this landscape. The firm’s first model, Lucid Air, was named MotorTrend Car of the Year the same week the company reported strong reservations. Meanwhile, a warm reception to the Rivian Automotive Inc. listing reinforced views that there are other pure plays in the space beyond Tesla Inc.

“I suspect that after the last week or so of news, we might see some analysts start to follow the company,” Gordon said. “I think we’ll see some analyst interest that hasn’t been there before.”

For Rivian, analysts remain in a quiet period that lasts for 25 days after the debut. Lordstown Motors Corp., which also went public via the same blank-check company route as Lucid, and has faced troubles related to liquidity and with regulators, is covered by nine analysts. 

In contrast, Lucid has three ratings with two buys, no holds and one sell, Bloomberg data shows. Its average price target of $44 is 19% below Wednesday’s trading levels of around $54.

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