Lucid stock price sits at crucial support: is it a good buy?

Lucid (NASDAQ: LCID) stock price has been in a strong bearish trend as investors worry about dilution risks and slow growth. The shares were trading at $6.47 on Tuesday, a few points above the year-to-date low of $6.23. In all, the LCID share price has plunged by over 90% below the highest level during the pandemic.

Dilution risks remain

Lucid Motors is struggling as concerns about dilution risks remain. The most recent results showed that the company’s revenue in the first quarter came in at over $149.4 million. While this was a 159% year-on-year increase, it was lower than what analysts were expecting.

Lucid’s research and development costs jumped by 3.8% to $229 million, mostly because of the upcoming Gravity SUV. Its SG&A expenses came in at $168.8 million. Lucid ended the quarter with over $3.4 billion in cash, cash equivalents, and investments. It has over $4.1 billion in total liquidity and the company expects that its CapEx for the year will be between $1.4 billion and $1.6 billion.

Despite this, the company could be forced to raise funds considering that its free cash outflow came in at over $1 billion in the first quarter. This cash outflow will likely see the company raise capital again in 2025. In its most recent results, the company said that its cash will last until the second quarter of 2024.

Lucid has a long history of diluting investors. The company has over 1.72 billion outstanding shares, up from over 30.9 million in 2020. As we wrote here, the company recently diluted its shareholders after raising $3 billion.

Analysts expect that Lucid’s total revenue in the second quarter will come in at $233 million. They expect that the company will break even in 2027.

Lucid stock price forecast

LCID chart by TradingView

Is it safe to buy Lucid stock. The daily chart shows that the LCID share price has been in a strong bearish trend in the past few months. It is now trading at $6.08, where it has struggled to move below in the past few months. The stock remains below the 50-day and 100-day exponential moving averages (EMA).

Further, the Stochastic Oscillator has moved below the oversold level while the Relative Strength Index (RSI) has moved below the neutral point at 50. Therefore, at this stage, the outlook of the shares is neutral. A break below the support at $6 will signal that the shares will have a bearish breakout as sellers target the next support at $5.