The Ride Could Get Bumpy For Lucid Motors Stock

It’s an understatement to say Lucid Group (NASDAQ:LCID) and LCID stock had a very good 2021. But will this be the case for 2022? It depends on two things happening.

The Lucid Motors (LCID) logo is displayed in front of an ad for the Air sedan.
Source: T. Schneider / Shutterstock.com

First, the EV maker will need to continue making progress at the same pace it’s been doing so lately. Second, and more importantly, its performance in 2022 hinges heavily on investor sentiment for vehicle electrification plays.

The first factor appears likely to pan out, even if it’s unclear whether Lucid can commence mass production without facing too many hiccups and hurdles. However, the jury’s still out on the second factor.

Based on how EV stocks are stabilizing, it may seem a bit alarmist to believe more deflation of the EV bubble is set to happen. Yet if the market conditions that created this bubble in the first continue to change, another round of big declines may lie ahead for Lucid, along with the higher prominent electric vehicle names like Tesla (NASDAQ:TSLA) and Rivian (NASDAQ:RIVN).

If you’re bullish on the EV megatrend, you may believe LCID stock is a winner that will keep on winning. But it’s important to keep in mind how changing sentiment could affect its performance.

The Latest With LCID Stock

Settling down after its late November/early December slide, Lucid is finishing up the year quietly. Two more positive developments ($1.75 billion convertible debt offering, inclusion in the NASDAQ-100 index) helped to counter more negative news, such as its disclosure of a Securities and Exchange Commission subpoena about the special purpose acquisition company (SPAC) deal that took it public earlier this year.

With this, plus the market calming down with its omicron/Fed worries, LCID stock has found support. As of this writing, it’s trading between $35 and $40 per share. But while the stock was a big winner in 2021 (up 280%), this may not be the case in 2022.

Again, concerns are not so much due to the risk that it drops the ball in the next 12 months. Based on how successful its execution has been this year, it’s hard to doubt that Lucid will meet its production goals for the next two years (20,000 vehicles in 2022, 50,000 vehicles in 2023).

Yet if in the months ahead, bullishness for EV plays continues to cool down? Meeting and/or beating near-term expectations may not be enough for it to hold onto its rich valuation.

Rising Rates Could Still Keep Lucid in Reverse

The market’s appetite for growth stocks played a big role in sending LCID stock to the moon this year. However, based on how sentiment is shifting, this may not continue in the months ahead.

That is, market environment is more likely to become more unfavorable to growth stocks. As the Federal Reserve continues to take on a more hawkish tone, mentioning faster tapering and rate hikes for 2022, growth stocks are going to continue to lose their luster.

In turn, the pivot away from riskier assets like early-stage growth stocks will carry on. Firmly in that category, EV stocks like Lucid will likely face more downward pressure. This could far outweigh company-specific positives, such as the budding automaker successfully ramping up production, or wowing Wall Street with its delivery numbers.

To what extent could that affect LCID stock over the next 12 months? At this point, it’s hard to tell.  We could see EV stocks experience an extended sell-off, much like what happened with internet stocks following the bursting of the dot-com bubble. As you may recall, even the dot-com winners in the making, like Amazon (NASDAQ:AMZN), saw massive drawdowns and took many years to get back to their respective high-water marks.

The Bottom Line

Based upon its success this year, it’s easy to be confident things will continue to work out favorably for Lucid. Yet whether that happens to LCID stock as well remains to be seen. The winds are blowing differently today than they were as recently as late November.

A return to normal for Fed monetary policy may signal the end of the epic run growth stocks have gone on since the start of the coronavirus pandemic. As the market’s view on EV stocks is in the driver’s seat, what’s the takeaway?

Before buying LCID stock just on your bullishness for the EV trend, take a read of the room. If it appears the cycling out of growth stocks will continue, it’s best to wait before buying it.

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.


Article printed from InvestorPlace Media, https://investorplace.com/2021/12/lcid-stock-ride-could-get-bumpy/.

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