The Lucid Stock Rally Could Soon Reverse Course

Nearly doubling over the past month, and up more than 25% in the past five days alone, why is Lucid Motors (NASDAQ:LCID) stock accelerating in price?

LCID stock
Source: Lucid Group

Chalk it up to not just one, but several positive factors. All of which have happened back-to-back-to-back. First, the across-the-board move back into EV (electric vehicle) plays. Tesla’s (NASDAQ:TSLA) reporting of strong quarterly results likely kicked this one off.

Second, a company-specific factor: the first deliveries of Lucid’s flagship Lucid Air sedan. Third, as William White reported Nov 8, passage of President Biden’s $1.2 trillion infrastructure bill. With billions included in the package to build out America’s EV infrastructure, this bill is seen as a boon for the EV industry.

Nevertheless, while all three have helped to jolt the stock, should you count on these factors to send it even higher? This run-up may not be over. But between signs that the recent rush into EV stocks has peaked, and the fact this company still has a far way to go before it begins to justify its current valuation, expect to see a pullback just around the bend.

LCID Stock is Hot Once Again, But For How Long?

Not since it was the poster child for the SPAC (special purpose acquisition company) bubble last winter has Lucid Group been this hot among investors. Admittedly, with the progress it’s made getting its first vehicles rolled off the assembly line, and delivered to buyers, it is not all hype sending shares rocketing toward higher prices.

That said, although these factors have been like rocket fuel for the LCID stock price, said fuel could soon run out. For example, the EV stock rally may be coming to a close. It’s too early to say, but the TSLA super-rally may be over. Why? Due to the market fully absorbing recent developments. Plus, news of CEO Elon Musk needing to sell billions worth of shares in order to pay the taxes on a past options grant.

Regarding the excitement around Lucid’s first batch of deliveries? It’s an impressive start, given that comparable early stage EV companies, for example, Fisker (NYSE:FSR), remain about a year away from achieving a similar feat. However, getting its first vehicles on the road is hardly enough to justify its current $77.4 billion market capitalization. As investors realize they’ve put the cart before the horse? Expect the off-the-charts positive sentiment surrounding it now to cool a bit.

How about the boost from the infrastructure bill? Mr. Market has used this to help extend the EV rally further. But as this bill likely is more beneficial for mass market EV makers than super luxury ones like Lucid? Using it as a reason to add another few billion to its valuation makes little sense. This latest rally could start to see a reversal, as the market comes to the same conclusion.

Why Shares in This Early Stage EV Maker Will Stay Volatile

As of this writing, LCID stock is trading for around $47.75 per share, and trending higher. It won’t take much to send LCID stock up to $50 per share before it’s all said-and-done. Yet after that? Its recent parabolic moves could come to an end. So, as excitement cools again, does that mean it’ll $50 per share will become its new floor, until the next batch of positive news sends it even higher?

I wouldn’t count on it. Still years away from its true “payoff moment,” this will remain a highly volatile stock. Things are looking bright right now, as reviews of the Air signal that its an EV that could give top dog Tesla a run for its money. But achieving this is merely the first step towards becoming an automaker with a valuation on par with that of “old school” names like Ford (NYSE:F).

Lucid has two key hurdles it still needs to climb. It needs to seamlessly scale up production. Plus, compete with both Tesla and incumbent luxury automakers (who are themselves moving ahead with all-electric models). Any sort of hiccup with either will likely result in an outsized move lower for shares. For instance, a production delay. Or, underwhelming delivery/sales results.

The silver lining? This may mean many opportunities going forward to trade around LCID stock. Buying it when speculators overreact to bad news, and cashing out when they overreact to good news.

The Last Word on Lucid Stock

A combination of both across-the-board “EV Mania,” plus positive news out of the company, has helped send Lucid shares “to the moon” again. However, just like the short-lived spike in price earlier this year, expect this latest run-up to soon lose steam.

Likely to stay volatile, what’s the verdict? Even if you’re confident in its long-term prospects, wait for the next bout of major weakness before buying LCID stock.

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.


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