Shares of Lucid Group (LCID) climbed 3.7% to $2.36 on Friday morning after Morgan Stanley upgraded the stock from Sell to Hold. The shift in sentiment, driven by the firm’s latest equity research, comes despite the electric vehicle (EV) manufacturer’s persistent financial challenges.
A Shift in Outlook Amid Lingering Concerns
Morgan Stanley analyst Adam Jonas, previously bearish on Lucid, softened his stance, citing a more “balanced risk/reward” scenario. Jonas highlighted Lucid’s potential to benefit from the rising trend of embodied artificial intelligence (AI) in EV technology.
The analyst also noted Lucid’s localized manufacturing strategy and its strong ties to Saudi Arabia as strategic advantages amid global supply chain shifts and geopolitical tensions.
Saudi Arabia’s Influence Grows
Lucid’s largest shareholder, Saudi Arabia’s Public Investment Fund (PIF), continues to bolster its stake. Through its subsidiary Ayar Third Investment Company, PIF recently acquired 375 million shares for $1.67 billion, increasing its ownership to approximately 58.8%.
The Saudi fund’s backing provides Lucid with a crucial financial lifeline, but the company’s growing dependence on the oil-rich nation underscores its vulnerability to foreign influence.
Financial Pressures Persist
Despite the stock’s short-term boost, Lucid still faces mounting financial headwinds. The company reported a third-quarter operating loss of $765 million to $790 million, significantly worse than analysts’ expectations.
The EV maker’s financial struggles reflect broader industry pressures, including intensifying competition from both legacy automakers and emerging EV players. Additionally, rising production costs and tepid consumer demand continue to weigh heavily on Lucid’s bottom line.
AI and Strategic Alliances: A Path to Recovery?
Investors and analysts are now watching closely to see whether Lucid can leverage AI technologies or forge new strategic partnerships to reverse its course. With the EV sector increasingly turning to autonomous driving capabilities and AI-powered vehicle systems, Lucid’s adoption of such technologies could become a potential catalyst for recovery.
A Temporary Boost or a Turning Point?
While Morgan Stanley’s upgrade has offered Lucid a momentary lift, the company’s ongoing financial losses and market pressures remain significant hurdles. Its ability to capitalize on AI innovation and strengthen key alliances will be critical in determining whether Lucid’s recent stock surge signals the start of a turnaround or simply a temporary reprieve.
