After prematurely calling a near-term top in Lucid Group (NASDAQ:LCID) stock on Nov. 11, I’ll admit so far, I’ve made the wrong call with Lucid.
The electric vehicle maker’s turbocharged surge in price (kicked off by it making its first customer deliveries) has carried on.
Renewed hype for EV stocks, and growing optimism that this upstart will one day beat out established rival Tesla (NASDAQ:TSLA), has pushed Lucid higher. Market-wide uncertainty is knocking it back as of this writing. But it’s up for debate whether it can carry on with its incredible run.
On one hand, investor confidence in its “Tesla killer” abilities could continue to grow. In turn, shares could re-hit the highs last hit back when the deal that took it public was first announced. Or make their way to new highs.
On the other hand, the latest wave of EV mania may be fading. More analysts are pointing to EV offerings from the incumbent automakers, plus Apple’s (NASDAQ:AAPL) EV plans, as to where you should place your bets. On top of this, overarching uncertainties could still seriously weigh on LCID stock. Put it all together, and Lucid may be at risk of soon giving back a large chunk of its recent gains.
If you believe bullish sentiment will carry on in the short term, you may believe my concerns are overblown. Nevertheless, keep them in mind, as investors may take their foot off the accelerator sooner than you think.
LCID Stock and its Runaway Run-Up in Price
Even for an early-stage EV stock, Lucid’s surge in price has been staggering. In the past month, another aspiring Tesla killer, Fisker (NYSE:FSR), is up around 37%. Rivian (NASDAQ:RIVN), which wants to take on not just Tesla, but mass market automakers as well, is also up around 52% since it went public at $78 per share on Nov. 10.
During the same time frame, LCID stock is up nearly 50%. Sentiment is definitely with EV names like LCID stock.
Better yet (at least for investors already long Lucid), this mentality may carry on in the weeks/months ahead. Hitting new milestones could do the trick. So too, could updates on reservation numbers and production targets.
Then again, we could see far fewer big developments out of the company in the next few months. That could lead to a snap-back in sentiment, and a move back to the $30s or $40s per share.
There’s Still Plenty in Play to Knock it Back Down
Fears of yet another Covid-19 variant are putting pressure on stocks across the board, including LCID stock. But while this latest bit of uncertainty could prove to be short-lived, this isn’t the only thing that could stop this high-flier in its tracks.
There’s still plenty in play specific to the company that could cause Lucid to experience a further dive in price. First, there’s the possibility of no news being bad news. In other words, if over the next few months, there’s little in terms of game-changing news out of the company, more investors could opt to take profit, causing a further reversal in its latest run-up.
Second, sentiment could snap back from the bullishness seen lately, back to the on the fence view the market took on shares throughout mid-2021. What could fuel this? The release of more sell-side commentary that states there are much better EV plays out there from a risk/return standpoint. For instance, like Morgan Stanley analyst Adam Jonas’ latest take on Lucid gave shares the equivalent to a “sell” rating.
Jonas believes not just Tesla, but incumbent automaker General Motors (NYSE:GM), along with auto parts maker Aptiv (NYSE:APTV), are better opportunities. In separate commentary, Jonas has also discussed how Apple’s plans to develop a self-driving EV is bad news for automotive names across the board. If other analysts follow suit, it could drive a further retreat out of its shares.
The Verdict on Lucid Stock
Calling a near-term top in a particular stock is by-and-large a fool’s errand. Your bearish call could prove true in time. But in the interim, shares could still shoot up, thanks to the market’s exuberance lasting longer than expected.
That could still be the case here with Lucid. Or will it? More positive news could help reverse its latest pullback, enabling it to zoom past its past high water mark of nearly $65. However, a lack of news, or the release of further bearish commentary, may keep shares moving in reverse.
So, what’s the best move with LCID stock today? Wait for more indication which direction the market will send this EV play from here.
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.
