It’s still debatable whether Lucid Group (NASDAQ:LCID) will become the next Tesla (NASDAQ:TSLA), LCID stock is delivering the same type of jaw-dropping performance that TSLA stock has delivered in recent years. But in the near-term, Lucid, which I have been quick to criticize, could perform well, at least compared to the overall market
In September, the uncertainty that’s been hanging over the market started to negatively affect stock prices. Richly priced, speculative growth stocks, on the whole, performed especially badly. Lucid is firmly in that category. Yet in the months ahead, its recent progress may be enough to keep the stock steady or even send it gradually higher.
In late September, the company impressed investors with its Production Preview Week. It also made meaningful progress by rolling its first vehicles off the assembly line. Over the next few months, as it starts making deliveries, the uptick in bullishness we’ve seen lately could continue.
I’m not saying that this former meme stock favorite is a surefire winner. Its valuation remains frothy. and the automaker’s competition could limit its ability to hit its much-touted 250,000 vehicle annual delivery goal. For now though, the shares may hold steady despite the market’s turbulence.
Recent Developments Have Changed Lucid’s Short-Term Outlook
For months, Lucid has been trading mostly on hope and hype. Last month, however, the company’s progress finally helped justify the buzz surrounding it. First, at the Production Preview Week, invited guests were able to tour the company’s Casa Grande, Arizona facility.
But it was another event that unfolded that week which really helped to change the short-term outlook of LCID stock. That was the company’s kickoff of vehicle production. On Sept. 28, Lucid announced that the first Lucid Air EV sedans had rolled off the production line. Deliveries of this vehicle are set to begin later this month.
Now that this start-up has finally moved to the production stage, its reservation total (which it most recently quoted at 13,000) could keep climbing, as its past production delays appear to no longer be an issue.
Increased reservation totals, plus other developments, could help sustain the recent renewal of excitement towards Lucid. That, in turn, may help soften the blow or even counter the downward pressure that “hot stocks” are facing right now, in the face of monetary tightening.
In the past, I’ve thought that LCID stock would drop on valuation concerns. With a $40 billion market capitalization, it’s sporting a premium valuation, given the company’s outlook over the next year or two.
However, if the automaker can continue to show investors that it’s making progress, the shares at the very least could hold steady or even move slightly higher.
Rising Competition Remains Lucid’s Key Long-Term Risk
Lucid’s progress may be enough to prevent LCID stock from tanking in the short-term. That said, don’t mistake this as a sign that the company is poised to become the “next Tesla.”
Lucid may be able to grow into a profitable EV brand. But getting to 250,000 annual deliveries, its ambitious goal for 2026, may not be within reach. That’s because, at the same time that this upstart is ramping up production, competition in the EV niche is ramping up as well.
Rather than Tesla, it’s incumbent luxury car makers, like Daimler (OTCMKTS:DMLRY) and BMW (OTCMKTS:BMWYY), that are Tesla’s largest threat. Both German luxury vehicle giants could prevent Lucid’s long-term projections from becoming reality. In recent weeks, Daimler and BMW have also taken big leaps, pivoting from gas-powered to electric-powered cars and SUVs.
Daimler has unveiled five new EV models. . BMW is launching the iX electric SUV. The jury is still out as to whether these models will wow EV fans like Lucid and Tesla have. Even so, brand equity alone may enable them to dominate the market. As a result, it may not be easy for Lucid to get to 250,000 annual deliveries.
Lucid Could Hold Steady
The popular EV play may sport a “priced to perfection” valuation, and its potential to become the “next Tesla” remains up for debate. Richly-priced “hot stocks” could continue to trend lower, but Lucid’s recent accomplishments may help save the day for it in the near-term.
LCID stock could avoid the brunt of the market meltdown. Better yet, it may have room to gradually gain over the next few months.
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.