It’s OK to Keep Some Chips Off the Table With Lucid Motors

Lucid Motors (NASDAQ:LCID) stock continue to plummet. This time it appears that some early investors are using the end of the lockup period to cash out.

Exterior of Lucid Motors building
Source: gg5795 /

Trading at less than $20 at the time of this writing, LCID stock is making it hard for early investors to justify its premium valuation.  

However, for investors who are looking at Lucid Motors for its long-term potential, there’s still reason to be bullish. At the end of September, Lucid is inviting analysts to its Production Preview Week. This will take place at the company’s advanced manufacturing plant in Arizona. If you’re a believer in transparency, this is a good news, bad news scenario. 

For optimists, the willingness to showcase its manufacturing facility can be read to mean the company is truly gearing up for production. On the other hand, 11,000 preorders are one thing; but the fact remains that the next car that rolls off the Lucid production line will be its first one. And with every day that passes, the company’s stated deadline for being ready for mass production sometime in the second half of 2021 gets closer to expiration. 

I’m not suggesting that Lucid Motors is trying to deceive investors. If my hackneyed headline didn’t tip my hand, I’m referring to the fact that a lack of semiconductor chips could make it difficult for Lucid to mass produce their vehicles.

It Could Get Late Early 

Of course, that could be an incorrect assumption. But without evidence to the contrary I’ll stick with it. And that makes my next statement something for investors to consider. In Lucid’s most recent presentation, it announced that expects to be fully capitalized through 2022. If the chip shortage is resolved by that time, you would imagine that Lucid will start announcing respectable delivery numbers.

But the late Yogi Berra is attributed with saying “It’s getting late early.” Like many Yogi-ism’s this saying has a kernel of truth. In this case, he was referring to a baseball team that falls behind in the early innings of a game. The initial thought is, there are plenty of time to catch up. However, in many cases, when a team falls behind early, there’s not enough time to catch up.  

For Lucid Motors, 15 months seems like a long time. But if the chip shortage lingers, the company may need to take capital raising measures. Those measures would be likely to have a dilutive effect on the LCID stock price. 

Scale Your Position in LCID Stock 

I know that all I’m saying is speculation. But the bullish argument is also full of speculation. The reality is probably somewhere in between.  

The global chip shortage will undoubtedly hurt Lucid Motors. To what extent remains to be seen. However, it’s not unreasonable to believe that a company that is just getting into production mode might be behind other automakers that have models in production.  

And as much as investors may like to believe otherwise, Lucid’s management has done nothing to quell that sentiment. For much of 2021, the company has said it was “very much on track” to start production this year. But it has been unwilling to commit to whether it could hit its previously stated target of 20,000 vehicles in 2022 

Again, I’m not suggesting the company is manipulating investors. I think that this is one factor that is out of Lucid’s control and investors hate uncertainty. That’s why until investors get a clearer picture, the best move may be to keep your position small and add to it as you get more information that warrants a more aggressive buy.  

On the date of publication, Chris Markoch 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 Publishing Guidelines.  

Chris Markoch is a freelance financial copywriter who has been covering the market for seven years. He has been writing for InvestorPlace since 2019. 

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