It depends on your time horizon. If you intend to hold LCID stock until the electric vehicle maker (possibly) scales into an EV powerhouse on par with Tesla (NASDAQ:TSLA), then entering a position today may make sense.
But if you’re looking at this as something that could see a big spike in the short term, then it’s best to look elsewhere. The wild moves Lucid stock made earlier this year, when the former SPAC (special purpose acquisition company) went from $10 to more than $60 per share aren’t likely to repeat themselves.
Instead, at best, expect little movement in the near term, even as the company followed up with its production news with another big but not necessarily game-changing development. Also, keep it mind it remains unclear how this stock will fare, if economic/market conditions change over the next year.
The buzz surrounding this vehicle electrification play may be warranted. Just don’t assume buying it now is a quick and easy path to profits.
LCID Stock and Its Latest News
Just weeks after announcing it had commenced production of its flagship Air luxury EV sedan, Lucid Motors released the details of its planned advanced driver assistance system. Named DreamDrive, this feature will be standard on the higher-end Air models, and an option on the regular Air model.
Announced on Oct. 12, so far this hasn’t had a big impact on the price of LCID stock. Yes, it’s another sign that this startup will have what it takes to compete with Tesla. But as its expected for a budding “Tesla killer” to have such capabilities in its vehicles, the fact this news hasn’t given shares a big jolt makes sense.
In the months ahead, expect similar types of news to have a similar impact. Even news such as initial delivery numbers may fail to give Lucid a big boost from today’s prices. Instead, it may take a year or two for shares to make their next big move. By then, the company will have completed its global expansion into Europe and the Middle East, then into China.
Its first few years of results stateside, and its initial results overseas, will give investors a better idea whether the company, which has touted it could be selling 250,000 vehicles a year by 2026, will hit (or come close to reaching that goal). For now, there’s still uncertainty whether it can not only compete against Tesla, but European luxury automakers like Daimler (OTCMKTS:DMLRY) and BMW (OTCMKTS:BMWYY), that are also making progress with high-end luxury EVs.
The Short Term Outlook
Again, the best-case scenario for LCID stock in the near term is that it holds steady until its clearer it’ll scale up from zero to a quarter million deliveries within a five-year span. The worst-case scenario? Markets get volatile again, and the buzz surrounding the company fails to soften the blow.
Yes, the volatility seen in stocks last month has eased. The three major stock market indices have recovered from their respective late September losses. The Fed’s tapering plans may not sink the ship. But there are plenty of other issues still looming, such as sooner-than-expected interest rate increases. As rising rates are bad for growth stocks, this could push shares lower, even if the company meets expectations.
That said, it’s not just possible multiple compression from rising interest rates that could negatively impact Lucid stock. A possible economic slowdown could have a negative impact on the stock and the company’s underlying sales. In other words, if the post-Covid recovery will give way to a stagflation (low growth, high inflation), or even just quasi-stagflation, then stocks overall may experience a correction.
In turn, with portfolios not quite as flush, demand among the mass affluent for the company’s vehicles (the Air base model alone costs $77,400 before EV tax incentives) could take a hit. Lower than expected results, plus a less bullish stock market, could result in a big short-term decline for LCID stock.
The Bottom Line
Earlier this year, the hype surrounding LCID stock resulted in quick gains for traders who had their timing right. Yet the fast money opportunity has long since last. Instead, the main way to play Lucid is to buy it now and hold it for several years, until it potentially becomes much like the EV maker it’s trying to emulate.
Along with patience, a stomach for a possibly bumpy road ahead is key as well with LCID stock. Keep both in mind before entering a position.
On the date of publication, Thomas Niel 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.
Thomas Niel, contributor for InvestorPlace.com, has been writing single-stock analysis for web-based publications since 2016.