Shares in luxury EV startup Lucid (NASDAQ:LCID) began to surge as the week wound down. After closing at $27.02 on Wednesday, LCID stock ended Thursday at $35.48 for a 31% gain. The rally continued in pre-market trading and the momentum continued on Friday. What has the market so excited about this company? Is it too late to get in on the action?
The surge in LCID stock is all about one thing: delivery. The company has been making headlines with a series of glowing reviews about its flagship Lucid Air EV. I wrote about that a week or so ago, predicting that the reviews were a good sign for LCID stock growth potential. At the time of publication, Lucid shares were trading for $24.73. The one thing missing from the Lucid picture has been customers. Not customers putting down deposits, but customers with a Lucid Air actually sitting in their driveway.
That’s about to change.
Lucid Announces First Customer Deliveries on Oct. 30
On Oct. 27, Lucid issued a milestone press release. The company announced that the first customer deliveries of its Lucid Air luxury EV were scheduled for Oct. 30.
We’ve seen how the market reacted to the announcement. LCID stock is on fire. It’s made bigger gains than Tesla (NASDAQ:TSLA) after that company announced a massive 100,000 vehicle order that will see Model 3 EVs become rental cars.
Why such an extreme reaction over a handful of cars showing up in driveways compared to a sale of 100,000 cars? While the big sale was obviously great news for Tesla and its shareholders, Lucid’s news is a true milestone.
There are a lot of EV startups out there right now. The one thing they all share — besides taking advantage of the growing excitement over battery powered cars — is being in a pre-production stage. They have prototypes, some have factories and some are looking for manufacturing partners. Many are taking customer deposits. But they don’t have a production line actually running and producing vehicles. They have no customers driving their cars. Until that happens, there’s a huge question mark over whether they’ll be able to get all their ducks in a row and become a “real” car company.
Lucid was lumped in that group. Providing Lucid Airs for auto reviewers to drive over the past several weeks was a first step. Handing keys over to real, paying customers is a huge next step. The market reaction to the news reflects the fact that Lucid is now a real, actual, legitimate EV manufacturer. It’s not just a shiny prototype on a stage accompanied by an impressive marketing deck.
LCID stock is surging to reflect the company’s achievement.
Of course, there are many challenges ahead for Lucid.
With customers driving its EVs will come real-world reaction to the cars. Based on early reviews of the Lucid Air, that may not be a problem, but any potential issues with the vehicle and/or Lucid’s manufacturing process will quickly become evident. In addition, the company will be in the process of ramping up production to mass scale. That can come with problems. I’m sure you remember Tesla’s scramble several years ago that led to the company assembling cars in giant tents.
Lucid’s biggest challenge is likely going to be expanding its model lineup. The Lucid Air series is a luxury sedan with a price that ranges from over $77,000 to $169,000. That is a very limited market. To survive and grow, the company needs to offer what the bulk of automobile buyers want: electric SUVs and mass-market EVs. The company has already announced the Gravity SUV, which is planned to go into production in 2023. After that, Lucid is talking a $25,000 EV but details are vague at this point.
Bottom Line on LCID Stock
LCID stock is making big moves to close out the week and the momentum is likely to continue as its first customers start to drive their new Lucid Airs.
Having an EV rolling off the production line is a big win for Lucid. If you add shares of this EV company to your portfolio now, there’s a good chance they will deliver solid growth over the next few years. However, this Portfolio Grader “B” rated stock is not without risk. Any poor experiences among the first Lucid Air buyers could result in a short-term hit to LCID stock. And over the longer term, the company still has to prove it can ramp up production to full speed and expand its lineup beyond luxury sedans.
Tesla has proven it can be done. And just look at the returns TSLA stock has delivered. That’s the hope for Lucid investors, and Oct. 30 marks the completion of a big milestone on that path.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
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