Lucid Group (LCID 0.76%) has a stock price of $2.51 and a market capitalization of just $7.7 billion, making it one of the smallest players in the U.S. electric vehicle (EV) space. However, if they exceed the market's expectations, smaller companies have more potential than larger ones to generate multibagger returns -- sometimes even enough to turn their early shareholders into millionaires.

For Lucid, that would be easier said than done. The EV maker has been grappling with persistent cash burn, competition, and now the impacts of President Trump's trade wars. So is this mid-cap a buy or a sell today?

The current state of Lucid

Lucid stock wasn't always so cheap. In 2021, the company went public via a reverse merger with a special purpose acquisition company (SPAC). That same year, it soared to an all-time high of $58 per share. Today, it's down by more than 95% from that peak.

The good news is that in the first quarter, Lucid's revenue jumped 36% year over year to $235 million due to a significant jump in vehicle deliveries -- even though its average selling price per vehicle slipped. However, while the growing top line helped it shrink its operating loss by $38 million to $692 million, that's still an alarming level of quarterly cash burn for a company with only $3.6 billion in cash and short-term investments on its balance sheet.

Lucid also has a negative gross margin, which means the cost of manufacturing and delivering its vehicles exceeds the revenue it earns by selling them. The only way out of this predicament is to improve economies of scale through new, higher-volume vehicle models.

Will SUVs save the day?

Some of Lucid's problems may stem from its focus on high-end sedans. According to Topspeed, an automotive information magazine, demand for midsize cars has fallen sharply in the U.S. as consumers pivot to categories like trucks, SUVs, and crossovers. Lucid's management aims to respond to that shift in preference by expanding its vehicle lineup.

While the Lucid Air is here to stay, it has added the new luxury Gravity SUV, which likely contributed significantly to its first-quarter growth. However, with a starting price of $81,550, the Gravity won't be a magic bullet for Lucid because it is out of reach of most consumers. Investors should expect more impact next year when the company rolls out its next model, a more affordable SUV. The company intends for its sticker price to start below $50,000.

Image source: Getty Images.

International expansion could be another long-term opportunity for Lucid. The company is majority-owned by Saudi Arabia's Public Investment Fund (PIF), which controls around 60% of its shares.

With a GDP per capita of $32,000 and an estimated 58,300 millionaires, the Saudis have plenty of purchasing power to buy luxury vehicles. Lucid opened its first manufacturing facility in that country in 2023.

How much multibagger potential does Lucid have?

In theory, Lucid Group definitely has millionaire-making potential. Its small market cap, coupled with impressive growth potential in the SUV market, could lead to multibagger returns over the long term. The company delivered just 10,241 vehicles in 2024, which gives it plenty of room to catch up to industry leaders like Tesla, which delivered almost 1.8 million vehicles that year.

However, Lucid faces significant risks. Right now, Lucid's cash burn is much too high for comfort. It will likely turn to outside sources of capital, such as additional secondary stock sales. That equity dilution would reduce current shareholders' claims on future earnings. While Lucid's Saudi connection serves as a backstop, it raises the possibility that the company may eventually be taken private.

While Lucid should be on your investing watch list, it might make sense to wait and see if the company can make more progress before buying its stock.