Lucid 's stock has boomed in recent days, but Morgan Stanley is warning of a bust on the horizon. Analyst Adam Jonas' price target of $5 implies the electric vehicle maker's stock will tumble 57.4% from where it closed Monday. That means Jonas, who carries an underweight investment recommendation, expects the stock to hit an all-time low sometime in the next 12 months. Lucid jumped 43% Friday following reports that Saudi Arabia's Public Investment Fund was considering buying the more than 30% of shares it does not already own . (The stock then fell almost 9% on Monday.) While Jonas said support from the Saudi Arabia could help the company long-term, he still sees a challenging road ahead for Lucid. LCID 5D mountain Lucid "We believe the fundamental outlook facing Lucid is more likely deteriorating than improving," Jonas said in a note to clients Tuesday, adding that a $20 billion valuation "discounts a successful outcome." The stock previously reached an intraday low of $6.09 and closing low of $6.17 earlier this month. It's up 72% in 2023 so far after collapsing 82%in 2022 and climbing 280% in 2021. To be sure, Jonas noted some benefits tied to having a relationship with the sovereign wealth fund and, by extension, the Kingdom of Saudi Arabia, such as support with infrastructure, supply chain, technology and talent acquisition. But Jonas cited Lucid's decline in net reservations and said to expect further declines following competitor Tesla' s price cuts . Though he said production issues should improve for Lucid moving forward, he was concerned about how demand for the "ultra-premium priced cars" would fare in an economic slowdown. Meanwhile, Jonas forecast Lucid will burn through an average of $900 million or more per quarter in 2023. Jonas only expects Lucid to break even on a free cash flow basis in 2026, following $500 million of equity issued in 2023 and a $3 billion capital infusion, split between debt and equity, in 2024. He anticipates a 25% increase in diluted outstanding shares through 2026. He did say the company has a plan to address international markets as a way to improve its standing in the electric vehicle industry. But Jonas also noted revamped strategy from Tesla that could hurt Lucid. — CNBC's Michael Bloom contributed to this report.
