Lucid Group (NASDAQ:LCID) stock bulls finally have something to celebrate. But will the good times last?
Just a couple of months after the company’s stock price fell close to $17, the shares are at their highest point since the company went public via a special purpose acquisition company (SPAC) deal in July with Churchill Capital Corp. IV.
Lucid began shipping its first electric vehicle, the Lucid Air EV, on Oct. 30. And the company has started redeeming its public stock warrants, which was yet another catalyst for the shares.
In all, it’s a good time to be a holder of Lucid stock. But now that the company has a product on the ground, things are going to be a little different for the Saudi-owned, California-based company.
And only time will tell if Lucid can really carve a profitable niche in the EV space or if it will be overlooked and overrun by bigger competitors.
Lucid’s Really Good Month
First, let’s take a look at the Lucid Air. It boasts a starting price of $77,400 with a top range of 520 miles. In comparison, Tesla’s (NASDAQ:TSLA) Model S has a top range of 412 miles, and its base model sells for $91,190.
The Air’s cheaper price is a key selling point for Lucid, considering that Tesla is the biggest name out there in electric vehicles and sports a market capitalization of more than $1 trillion. Buyers who may want a Tesla but balk at the price may be more inclined to try the Lucid Air.
And then there’s the reviews. InvestorPlace’s Louis Navellier has a great rundown, including glowing reviews by MotorTrend, Car and Driver and Consumer Reports.
Those kind of reviews really turn heads, particularly considering that Tesla’s production failures have been all over the internet. Just do a web search for “Tesla problems” and you’ll get more than 80 million results covering everything from battery issues to faulty suspension to broken parts.
Lucid is riding a wave of good publicity now, and no wonder. Of course, the Lucid Air vehicles that were loaned to Car and Driver, Consumer Reports and other reviewers were completely ship-shape with no production issues. Lucid is going to put its best foot forward when it comes to reviews.
The real test will be how the mass-produced cars will hold up when they are given to customers. Will we start seeing YouTube videos and social media posts of fenders falling off, battery failures or other production issues like we did when Tesla was in its infancy?
My youngest son would absolutely faint with glee if I bought an electric vehicle. But you can bet that I’m going to hold off on even considering Lucid until I see how these EVs really hold up under day-to-day use.
LCID Stock at a Glance
Lucid’s shares may be inflated for now on the strength of the good reviews, excitement over the Lucid Air distribution and the cashless redemption of public warrants.
But what will drive Lucid stock in the future – and by extension, the investment portfolios of the shares’ owners – will be the automaker’s quarterly earnings reports. The company will report its third-quarter earnings on Nov. 15.
The automaker has modest plans for this year; it’s looking to produce 577 vehicles by the end of 2021. It’s planning to make 20,000 vehicles in 2022 and 25,000 in 2023.
So those production numbers (which will likely be reported on a monthly or quarterly basis moving forward) will be important for investors. If the company is hitting its targets while maintaining quality, that will be a good sign for LCID stock.
If it’s struggling to hit those numbers, though, then the recent gains by Lucid’s shares will likely be temporary.
One word of caution comes from Morgan Stanley analyst Adam Jonas, who toured Lucid’s new manufacturing plant in Arizona. In a research note, he says that investors should “take it easy with the expectations a bit and give this company a chance to execute.”
He put an “underweight” rating on LCID stock, with a price target of just $12.
The Bottom Line
For Lucid, the excitement of launching itself and its stock and getting its plant operational is pretty much over. Now it’s grind-it-out time, making sure the company’s quarterly reports can exceed expectations and solidifying its place in the EV space.
And that’s going to be hard. Tesla is not going away. Ford (NYSE:F) and General Motors (NYSE:GM) are among the established automakers that are investing heavily in EVs. Startups like Fisker (NYSE:FSR) and Rivian are also vying for market share.
Lucid is an interesting investment, but its far from a sure thing.
On the date of publication, Patrick Sanders was long TSLA stock. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Patrick Sanders is a freelance writer and editor in Maryland, and from 2015 to 2019 was head of the investment advice section at U.S. News & World Report. Follow him on Twitter at @1patricksanders.