It's clear that Lucid Group (LCID -6.29%) stock has plenty of long-term potential. Its market cap is less than $10 billion, while more mature players like Tesla enjoy a market cap more than $1 trillion. To be sure, there's still a long way to go for Lucid to compare with the likes of Tesla. But the company delivered 71% more vehicles last quarter than the year before (while Tesla's deliveries were little changed in the period). That follows a 90% jump from the previous quarter. If this pace continues, Lucid could become a household name in the years to come.
But does all this promise mean long-term investors have profited? You may be surprised by the numbers below.
Lucid Group investors are probably shocked by this outcome
In 2021, several electric car stocks went public to great fanfare, raising billions of dollars at premium valuations. While those companies have reporting rising sales since 2021, that hasn't translated into shareholder gains.
LCID PS Ratio data by YCharts
Despite Lucid boosting its sales by 16,300% since 2021, patient investors have lost roughly 89% of their initial investment. A $50 bet would now be worth about $5.
Why the disconnect between sales growth and stock performance? The issue isn't necessarily tied to Lucid or its performance, but with the market itself. Since 2021, the price-to-sales multiple for Lucid has slipped by more than 99%. So while sales are growing quickly, they haven't grown quickly enough to offset the market's tempered expectations for Lucid's long-term future.
Although Lucid as a business continues to execute well, the market simply had priced too much hype into the stock. And as Warren Buffett advises, investment returns are ultimately a reflection of the price you pay. In 2021, investors were simply paying too much for Lucid stock. That was true for many climate related securities.
With the stock now trading at a deep discount compared to its past, perhaps new Lucid investors will fare better than their predecessors. But it's a good reminder of the importance of valuation.
