Why Morgan Stanley Believes Lucid Could See Potential Dilution Risk In 2027

• Morgan Stanley said it believes Lucid's new management team is focused on improving execution and strengthening the business as the company prepares for its midsize vehicle launch.
• The firm said reducing cash burn remains a key priority, but it expects Lucid will still need to raise additional capital to fund its operations.
• In a statement to Stocktwits, Lucid said that it has sufficient liquidity to continue its operations well into 2027.

Morgan Stanley warned that Lucid Group Inc. (LCID) may need to raise $2.5 billion in fresh capital next year, a move the firm believes could increase dilution risk for existing shareholders.

According to TheFly, Morgan Stanley has an ‘Underweight’ rating and a $5 price target on Lucid, implying a 5% potential downside from current levels.

Lucid shares were up nearly 20% in Wednesday morning’s trade. LCID stock was among the top trending tickers on the platform at the time of writing.

Why Morgan Stanley Is Cautious On LCID

Morgan Stanley said it believes Lucid's new management team is focused on improving execution and strengthening the business as the company prepares for its midsize vehicle launch.

The firm said reducing cash burn remains a key priority, but it expects Lucid will still need to raise additional capital to fund its operations.

Earlier this week, RBC Capital Markets analyst Tom Narayan lowered his price target on Lucid Group to $7 from $8 while maintaining a ‘Sector Perform’ rating as part of a broader preview of second-quarter (Q2) results for global automakers.

Narayan said higher fuel prices could encourage U.S. consumers to shift toward smaller, more fuel-efficient vehicles, though not necessarily electric vehicles. He believes that the trend is likely to benefit Japanese automakers more than Detroit's traditional "Big Three" manufacturers.

Koyfin data shows that the average 12-month price target on Lucid is $8.3, implying an upside potential of 52% from current levels. Of the 12 analysts covering the stock, eight have a ‘Hold’ rating, one has a ‘Buy’ rating, while three have a ‘Sell’ or ‘Strong Sell’ rating.

LCID Denies Bankruptcy Rumors

After a report on Tuesday stated that Lucid may be considering options to take the company private or file for bankruptcy proceedings, the company officially denied the rumors, calling them “completely false.”

In a statement to Stocktwits, the company said that it has sufficient liquidity to continue its operations well into 2027, while adding that it had not formed any board committee to consider going private or filing for bankruptcy.

Lucid appointed a new CFO and announced other leadership changes earlier this month, while halving the number of executives who report to CEO Silvio Napoli.

“We are simplifying the organization, strengthening leadership, enforcing accountability and aligning our structure with the priorities that matter most: customers, quality, and innovation,” said Napoli.

Napoli was appointed Lucid's CEO in June, succeeding interim chief Marc Winterhoff. Winterhoff had led the company since February this year, when co-founder Peter Rawlinson stepped down as CEO.

How Did Retail Traders React?

Retail sentiment on Stocktwits around Lucid trended in the ‘extremely bullish’ territory, with message volumes at ‘extremely high’ levels at the time of writing.

LCID stock is down 48% year-to-date and 76% over the past 12 months. The Vanguard Small-Cap Growth Index Fund ETF (VBK) is up 26% over the past 12 months, while the iShares Russell Mid-Cap ETF (IWR) is up 19%.

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