Lucid Motors (NASDAQ:LCID) stock took off like a rocket when the SPAC set up by Churchill Capital IV announced in February that it was planning a reverse merger with the electric vehicle maker. But the deal hit some roadblocks and the California-based electric vehicle company didn’t end up sealing the deal until late July.
Since then, the stock has been in a trading range.
The point is, there have been more than a few twists and turns with LCID stock, and that will likely continue. Let’s hope its brakes are as good as its acceleration.
LCID Stock Already Big Time
Before it even went public LCID stock has $4.4 billion in the bank. Now it has a $36 billion market cap. It’s about the same size as marketing software firm HubSpot (NYSE:HUBS) or financial services firm State Street (NYSE:STT). That’s some serious company for carmaker that hasn’t delivered its first car yet.
But the fact that it has a solid $4.4 billion in the bank for its first year of operations is a good sign. Add in the recent news that its first car, Lucid Air, just received EPA certification of its 500-mile range. That makes it’s the longest-range production EV to hit the road yet.
Bear in mind, the Air isn’t for everyone. Or should I say, it’s for everyone that can afford it. The base model starts at $70,000 and the Touring model starts at $87,000.
And by all reports – LCID has made demo cars available for car journalists to drive at various car shows and events – it leaves nothing to its luxury competition.
Is the EV Halo Too Bright?
The trouble with all this is, LCID stock is pretty darned expensive given the fact that its product hasn’t even hit the streets. I mean, Tesla (NASDAQ:TSLA) has $737 billion market cap. That’s more than double the market cap of Toyota (NYSE:TM), Honda Motor Company (NYSE:HMC) and General Motors (NYSE:GM) – combined!
Valuations are insane.
And where other companies in other sectors get hammered whenever a new competitor or two roll into the market, EV makers just continue to soar. Even China’s Nio (NYSE:NIO) has a $60 billion market cap.
This is a market that has forgotten the acrid smell and bitter taste of a market correction. A new century, same old Roaring Twenties!
Ironically, 100 years ago the American Electric Vehicle Company launched its first production model EV. And there were nearly four dozen other carmakers in the US at the time. By the 1950s, there were less than half that number, and dropping.
History Rhymes
The famed saying, “History never repeats itself, but it often rhymes,” is attributed to Mark Twain (aka Samuel Clemens).
And we’re starting to see that rhyme in EVs as well as other green technologies. Some of this has to do with the rise in ESG investing by institutional investors. There’s a lot of money chasing companies that have been blissfully ignored by Wall Street for years, until now.
And now LCID stock and its competitors are the beneficiaries, for now.
As long as the markets continue to rise and money is cheap and investment banks are backed by the Federal Reserve, all is good. Risk is low to non-existent, and the little investor is having as much fun as the investment houses.
But I’m not here to say the end is nigh. I’m just saying that in any correction, this high flier will be the first ones to get their wings clipped. And all these feel-good companies with no earnings and huge market caps will start to look very different valuations matter again.
I like LCID stock. But not at $20. I’d say $13 to $15 is a decent price range. But it’s still a speculation at that point. It needs some cars on the road to justify its current status.
On the date of publication, GS Early did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
GS Early (aka, Gregg Early) has been an award-winning financial writer and editor for nearly three decades, working with many of the leading financial editors and publishers during that time. He’s seen a few things and heard plenty.
