As investors cool their jets with regards to omicron and inflation worries, the Lucid Group (NASDAQ:LCID) stock sell-off may be over. But does that mean shares in the hot electric vehicle play are set to soar again in price?
Not so fast. Yes, much of its run-up in price this fall was justified. Getting its first vehicles off the assembly line, plus the fact its flagship vehicle, the Air, was crowned MotorTrend’s “Car of the Year,” points to talk of this company possibly beating Tesla (NASDAQ:TSLA) at its own game as being more than just hype.
A move from $20 per share to $40 per share made sense. However, its move last month back to $55 was overdoing it a bit. Lucid has a ways to go before it’s a lock that it’ll meet its ambitious target of 250,000 annual vehicle deliveries by 2026. Much like Tesla did in its early years, Lucid will likely experience delays and hiccups as well. These will likely cause a temporary impact to the price of its shares.
That’s not all. The market may be acting positively to the Federal Reserve’s recent hawkishness. Even so, it’s unclear whether bullish sentiment for growth stocks will resume. The prospect of rising interest rates could limit their ability to rise further in price going forward.
This points to LCID stock staying stuck at present levels in the near term.
The Latest With LCID Stock
Stock volatility hasn’t been the only issue weighing on shares of Lucid Group. There was something else that drove shares lower earlier this month: news of a subpoena from the Securities and Exchange Commission. This is related to the special purpose acquisition deal that took the company public earlier this year.
As seen with similar high-profile blank-check company deals, like the Digital World Acquisition Corp (NASDAQ:DWAC) deal with Trump Media & Technology Group, the SEC now has the SPAC space in its crosshairs. Yet I wouldn’t view this regulatory scrutiny as something that should make you full-on bearish about LCID stock.
Along with this bit of bad news, there was also a bit of good news for the stock. Lucid was added to the Nasdaq 100 index. Investors reacted favorably to this. But like how the SEC subpoena shouldn’t make you bearish, this small potatoes development isn’t something that’s going to send Lucid back into bull market mode.
Not when investors weigh cycling out of growth stocks, on the heels of an increasingly hawkish Federal Reserve. Again, this doesn’t necessarily mean growth stocks, including EV stocks, are heading for some sort of epic collapse. However, the Fed’s game plan to take away the punch bowl could make it tougher for these high-fliers to hit new highs in the months ahead.
Don’t Rule Out Possible Hiccups and Headwinds
It’s not just changes in the stock market environment that could make it hard for LCID stock to head back to its past high in the near term, much less hit new highs. The EV maker has clearly been on a roll these past few months. Making its first deliveries, and winning accolades, are all clearly steps in the right direction.
Still, I wouldn’t expect a smooth road ahead. Even as it’s gotten over the initial hurdle, Lucid Group still faces execution risk as it moves to mass production.
Rising competition in the EV space remains a possible risk as well. Besides Tesla, and the incumbent automakers, rival luxury EV makers could also limit its ability to grow in line with its projections. For example, consider Polestar, which like Lucid has chosen to go public via the SPAC route via a merger with Gores Guggenheim (NASDAQ:GGPI).
Polestar, backed by Geely Automobiles (OTCMKTS:GELYF) and its Volvo (OTCMKTS:VLVLY) unit, is also aiming for six-figure sales within a few short years. Put simply, this more crowded field could present some challenges for Lucid.
The Bottom Line
I won’t rule out the possibility there’s another wave of EV mania in 2022. Yet if one fails to arise, it may be difficult for Lucid shares to set the world on fire like they’ve done in 2021.
Changing market conditions may limit the ability for growth stock to deliver another year of above-average gains. Hiccups and headwinds could also impact the company’s operating performance. This may also limit its ability to experience renewed bullishness.
If you’re planning to hold LCID stock until it reaches its payoff moment, you may still want to buy. But if you’re banking on another surge within a matter of weeks or months, you may want to look elsewhere for a potential fast money play.
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, a contributor for InvestorPlace.com, has been writing single-stock analysis for web-based publications since 2016.
