The electric vehicle (EV) market has been the talk of the town this year, with major names likes Tesla (NASDAQ:TSLA), Ford (NYSE:F) and General Motors (NYSE:GM) all up more than 35% year to date (YTD). However, another new name has been making major headlines as well. Lucid Motors (NASDAQ:LCID), which came public after merging with a blank-check firm, has been dominating headlines. LCID stock is up 90% in the last three months.
LCID Stock Joins Nasdaq-100
And fortunately for fans of Lucid, attention keeps coming to the electric vehicle startup. Over the weekend, investors learned that LCID would be joining the Nasdaq-100 index, along with Airbnb (NASDAQ:ABNB), Palo Alto Networks (NASDAQ:PANW) and Fortinet (NASDAQ:FTNT).
This is a major win for LCID stock, as it will provide a boost of liquidity and legitimacy for the EV maker. Passive and active index funds who track the Nasdaq-100 will buy shares of LCID stock, which can translate into a higher stock price. Institutional firms may also feel more inclined to provide financial coverage for Lucid.
The Nasdaq-100 is an index that tracks the 100 largest non-financial companies listed on the Nasdaq Exchange. In order to be added to the index, a company must have an average trading volume of at least 200,000 shares a day and be listed on a major exchange for at least three months. Even though Rivian (NASDAQ:RIVN) boasts a market capitalization almost $40 billion greater than Lucid, it was not eligible since the company made its public debut on the Nasdaq on Nov. 10. The Nasdaq-100 rebalances its holdings once per quarter, so investors in RIVN stock are anticipating an index addition next quarter.
Furthermore, shares of LCID stock are up 279% YTD, beating out the S&P 500’s return of 27% by a wide margin.
The Bottom Line on Lucid Motors
While the addition to the Nasdaq-100 is certainly great news, Lucid still has a lot to prove. Even though the market cap of Lucid is upwards of $60 billion, the EV maker only reported $232,000 of revenue during Q3. Moreover, Lucid’s 2022 production plans for 20,000 vehicles is “not without risk given ongoing challenges facing the automotive industry, with global disruptions to supply chains and logistics.” The EV maker plans on launching the Touring, Grand Touring and Pure versions of the Lucid Air next year.
The bottom line is that Lucid trades at a pricey valuation that has not yet been proven by its sales. However, potential is high as more and more people hop on the EV trend. In 2020, EVs accounted for 2.4% of all new U.S. vehicle sales, up from 2% in 2019. This figure is expected to grow higher as EV adoption expands across the country.
Investors in Lucid should keep a watchful eye on the EV maker as it releases more data on bookings, reservations and production capacity. The pressure is on management to execute as EV competition revs up.
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.
