What Lucid’s Partnership With SoundHound Means for LCID Stock Lucid stock is up 17.4% after announcing a partnership with SoundHound; however, long-term investors will want to watch operating margins closely before buying

By Chris Markoch

This story originally appeared on MarketBeat

LUCID electric vehicle

One highlight of January’s Consumer Electronics Show (CES) was the unveiling of the partnership between Lucid Group Inc. (NASDAQ: LCID) and SoundHoundAI Inc. (NASDAQ: SOUN). The partnership will integrate SoundHound's Chat AI into a proprietary Lucid Assistant. 

The announcement was made in early January, but CES was the first time consumers and investors got to see the partnership in action.SoundHound’s technology will allow the Lucid Assistant to respond to the prompt “Hey Lucid” in the same way that consumers interact with Google’s Alexa or Apple’s Siri.

In addition to controlling critical features, the technology will contain all the information in the owner’s manual, which can give drivers information about virtually every aspect of the vehicle’s functionality.

This announcement, coming on the heels of the company’s launch of the Gravity SUV, its first offering in this arena, has been enough to push LCID stock up 17.4% in the 30 days ending on January 14. However, with the stock now bumping up against the high end of analysts’ estimates, investors may have to wait until the company’s upcoming earnings report in February for better direction.

Lucid Faces a Significant Barrier to Scalability

Lucid has cleared an important bar by bringing its EVs into production. The company stands out among automotive stocks for its blend of luxury and sustainability. Through the first three quarters of its 2024 fiscal year, the company is on pace to deliver record sales and delivery numbers. Deliveries outpacing production can be taken as a sign of growing demand.

However, the next hurdle is proving it has an audience that allows for scalability. That one won’t be as easy to clear. Lucid will produce a total of around 9,000 vehicles in 2024. The good news is that it will beat its forecast. The caveat is that the number speaks to the premium price and narrow niche a Lucid vehicle commands. 

Lucid operates in the luxury EV sector. According to Mordor Intelligence, the luxury EV market will be valued at $249.91 billion in 2025 and is expected to grow at a compound annual growth rate (CAGR) of 19.5%. That puts the estimated market size at $609.1 billion by 2030.

For context, if Lucid’s Q4 revenue is around the same $200 million it generated in Q3, the company will have full-year revenue of around $775 million. That’s about 3% of the entire market at a time when Lucid is still unprofitable. However, analysts are projecting the company to generate revenue of approximately $1.6 billion in 2025, which highlights the company’s firm footing in the luxury EV market.

What to Watch for Before Investing in LCID Stock

Lucid may have an uphill road to profitability, but there are some reasons for optimism. First, the company has firm backing from major investors such as the Saudi Arabian Public Investment Fund (PIF).

This has helped Lucid increase its total liquidity to over $5.16 billion. And with capital expenditures in 2024 totaling approximately $1 billion, the company should be on solid footing until 2026. At that time, Lucid plans to launch a mid-size SUV that the company estimates will have a price tag of around $50K. 

In the meantime, the company will have to prove that it can improve its operating margins. To clarify, the company may not turn a profit soon, but it must convince investors that profitability matters without further diluting LCID stock, as seen in October 2024, when shares hit a 52-week low.

The EV revolution is real, with vehicle numbers set to grow as battery technology and infrastructure improve. However, optimistic projections alone don’t justify owning LCID stock.

For that, you’ll need the conviction that this $8.9 billion company will be able to become profitable or perhaps license some of its technology to generate more revenue, as in the case of Rivian Automotive Inc. (NASDAQ: RIVN). The company has openly expressed its willingness to do that, but it has to find a willing partner. 

Want to be an Entrepreneur Leadership Network contributor? Apply now to join.

Growing a Business

What Our Digital World Is Missing — and How I Turned It Into $100 Million After Dropping Out of High School

I went from high school dropout to $100 million CEO by sticking to one very important learning principle.

Growing a Business

This Charleston Hotspot Found an Inflation Loophole That Helps It Avoid Rising Food Costs – Here's Its Secret

Miller's All Day partners with local farmers to combat rising inflation costs and thrive in Charleston's competitive restaurant scene.

Business Plans

Healthy Business Growth Comes from Depth, Not Just Disruption — Here's Why

For startups with a strong foundation, here's how to discover and deliver new products and services that customers want.

Business Ideas

70 Small Business Ideas to Start in 2025

We put together a list of the best, most profitable small business ideas for entrepreneurs to pursue in 2025.

Business News

Walmart Is Laying Off Hundreds, Relocating Others as the Company Closes a U.S. Office

Walmart is giving some employees at least a month to decide if they want to relocate.

Starting a Business

Why Psychological Courage Is the Secret Ingredient for Successful Startups

This article explores the concept of psychological courage in startups, highlighting how employees — not just founders — can develop resilience, face challenges head-on and thrive in uncertain environments by embracing reality, problem-solving effectively and pushing through struggles.