Investors remain highly interested in electric vehicle (EV) names as adoption accelerates globally. However, many EV names have taken a beating recently. Shares of Lucid Motors (NASDAQ:LCID) have declined by over 20% in the past month, even after the company was added to the Nasdaq-100 index. The addition will provide increased liquidity and legitimacy for the young EV contender. Additionally, passive and active funds who track the index will buy shares of LCID stock, which could translate to a price premium.
What’s Going on With LCID Stock?
Yesterday, Rivian (NASDAQ:RIVN) reported earnings for the third quarter after the market close. Today, shares of RIVN stock declined by as much as 14% due to the company reporting a decreased 2021 production target affected by supply chain issues. Rivian also shared a net loss of $1.23 billion. Fans of LCID stock may be concerned that Rivian’s supply chain issues could signal issues for Lucid as well. Shares of LCID stock declined by as much as 9% today before quickly reversing higher to a loss of less than 2%.
The current Wall Street price targets for LCID stock may already reflect the threat of supply chain issues and Lucid’s lofty valuation. Out of three firms covering LCID stock, the average price target is $44.33, which represents upside of just 11%.
However, two of these price targets were made in early September when LCID stock was trading in the $18-$20 range. And the third, from Bank of America analyst John Murphy, recently doubled. Murphy previously quipped that Lucid is “one of the most legitimate among the universe of start-up electric vehicle automakers and also a relative competitive threat to the universe of incumbent automakers.” He even referred to the EV company as “the Tesla/Ferrari of new EV automakers.” Since then, Murphy has doubled his price target from $30 to $60.
The Bottom Line on Lucid
Lucid is a company that derives most of its valuation from estimated discounted future cash flows. The company reported a paltry $232,000 in revenue during Q3, which is backed by a massive $65 billion market capitalization. The Federal Reserve recently made its prediction that there would be three rate hikes in 2022. As a result, these rate hikes could have a negative effect on LCID stock.
Investors in Lucid should watch for potential production output changes for 2022 and any other updates on reservations and bookings. Rivian’s supply chain issues certainly did not help.
On the date of publication, Eddie Pan 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.
