Lucid Motors Stock Has Gotten Too Far Ahead of Itself to Be Worth Holding Here

When it comes to Lucid Motors (NASDAQ:LCID) stock, very good or even excellent may not be good enough for investors who buy in at this point.

A photo of the Lucid Motors Air EV from 2018.
Source: ggTravelDiary /

With the shares still trading at nosebleed levels and Lucid facing tough competition, moving the shares much higher in the next few years could very well prove to be impossible.

Even though I’m still bearish on Lucid’s shares because of their high valuation, I’m becoming more bullish on the automaker.

The two main factors behind my increased optimism are a strong review for one of the company’s key upcoming vehicles by a prestigious publication, Motortrend, and the certification by the U.S. EPA of roughly 500- mile range for Lucid’s two upcoming electric vehicles.

Jonny Lieberman, the Motortrend writer who drove the company’s lucid air Dream Edition R, lavishly praised the EV.  He called the EV “a sleek-looking EV with nearly 100 hp more than the Tesla Model S Plaid…unlike Tesla, Lucid bothered to put a proper interior in its car.”

Raving about the EV’s handling, Lieberman contended that “It leaps and bounds out of corners,” and can deliver “a tsunami of thrust that the smart all-wheel-drive system takes full advantage of.”

On Sept. 16, Lucid disclosed that the EPA had given the automaker’s Lucid Air Dream Edition Range an official rating of 520 miles.

According to Motortrends‘ Lieberman, the two versions of the Dream that Lucid plans to release have ranges of 481-520 miles and 451-471 miles.

Those ranges are significantly above those currently offered by Lucid’s top competitors, including General Motors (NYSE:GM), Volkswagen (OTC:VWAGY) and Tesla (NASDAQ:TSLA).

The Good News Probably Won’t Be Good Enough

Despite having no revenue yet and not exactly boasting a ton of orders, (as of July, it reportedly had only 10,000 reservations), the market capitalization of LCID stock is an extremely elevated $42 billion.

To put that into perspective, the market capitalization of Ferrari (NYSE:RACE), which has an extremely powerful brand and delivered over $3.75 billion EUR of revenue in 2019, is just $53.5 billion.

Interestingly, Bank of America, which is very bullish on LCID stock compared Lucid to Ferrari recently.

Put another way, it’s possible to say that if Lucid becomes as successful as Ferarri, LCID stock will only go up slightly more than 20%.

Given the immense competition that Lucid is facing, the automaker will have trouble justifying the valuation of LCID stock.

Adam Jonas, the Morgan Stanley (NYSE:MS) analyst widely considered to be one of Wall Street’s foremost experts on the EV sector, wrote that he’s worried about Lucid’s “competition, strategy and valuation.”

He added that Lucid will likely have to raise more capital and suggested that it could have trouble competing with government-backed firms in some markets outside of the U.S. Jonas maintained an “underweight” rating on LCID stock.

Meanwhile, companies like ChargePoint (NYSE:CHPT) and Blink (NASDAQ:BLNK) are building charging stations around the country, as are many of the large automakers. Plus, the bipartisan infrastructure bill includes $7.5 billion for new charging stations.

With battery charging speeding up and many charging stations likely to be built in the U.S. over the next year or two, whether an EV has 350 or 500 miles of range will not be nearly as important in 2023 as it is now.

The Bottom Line on LCID Stock

The evidence is mounting that Lucid will have difficulty justifying the valuation of LCID stock, even if it makes superb EVs.

Therefore, I continue to advise investors to sell the automaker’s shares.

On the date of publication, Larry Ramer did not have (either directly or indirectly) positions in any of the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

Larry Ramer has conducted research and written articles on U.S. stocks for 14 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015.  Among his highly successful, contrarian picks have been GE, solar stocks, Roku, Plug Power and Snap. You can reach him on StockTwits at @larryramer. 

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