Lucid Stock Is Expensive After Rising More Than 63.3% In Three Months

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Lucid Motors (NASDAQ:LCID) is one of the most interesting electric vehicle (EV) stocks in the market. The market for zero-emission vehicles has never been so lucrative with Lucid’s arrival on the scene at just the right time.

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

Tesla (NASDAQ:TSLA) is now the biggest car company in the world. And President Joe Biden’s administration just passed a gigantic infrastructure package with a significant EV component. No wonder LCID stock has a one-year return of 301.3%.

Although Lucid is still a new company, investors are looking past this, especially at this early stage. After Lucid Motors’ merger with special purpose acquisition company (SPAC) Churchill Capital Corp IV earlier in the year, shares skyrocketed, only to give up most of its gains later. However, due to certain short-term catalysts, LCID stock is on the rise once again.

For instance, Lucid announced it kicked off deliveries of its Air electric sedan on Oct. 30. CEO Peter Rawlinson told CNBC’s Jim Cramer to expand overseas in the Middle East and China. Lucid is also planning its next phase. After the successful launch of Air, it will bring an SUV called Gravity to the markets in 2023.

Both of these announcements were met with great fanfare. But then there was the inevitable drop. Because of this risk, investors should be aware of Lucid Motors’ high volatility rates before investing any money into it.

It is also worth considering that there are not many near-term catalysts left for you to exploit. Hence, the stock price will continue meandering before the penny drops. Consequently, shares will revisit prior lows.

The Business Model Sets It Apart

The volatility of electric car stocks is something that you should consider before investing. Lucid Motors only needs one analyst report or an announcement from their company, and its stock price can move significantly.

But it is important to remember the enterprise is at a nascent stage. It doesn’t have any profits or earnings to speak of at this point. However, one of the major reasons investors are bullish is the production process. The company manufactures everything in-house rather than relying on outsourcing.

Lucid Motors assembles all of the different models at its factory in Arizona, which means less time wasted on contract work, and the focus is on building high-quality cars. Manufacturing in-house is a smart decision for many reasons.

It gives your company the flexibility and quality control of doing things themselves, which can help you grow with their products as they evolve (versus outsourcing).

Moreover, in the EV industry, retaining institutional knowledge is key. That gives Lucid a competitive edge compared to companies like Fisker (NYSE:FSR), which employ an asset-light model.

LCID Stock Is a Growing Market

The market for electric vehicles is growing exponentially. And many investors are banking on this trend to make themselves rich.

At the end of 2020, China had an all-time high of 4.92 million new energy vehicles (NEVs) on its roads. Much like other administrations around the world, Beijing is actively encouraging the EV sector by offering generous incentives such as tax breaks for EVs and building out EV infrastructure around the country. China has laid out an aggressive strategy to require all car sales in 2035 to be either hybrids or NEVs by 2035.

Meanwhile, the $1.75 trillion Build Back Better Act includes substantial federal subsidies for purchasing an electric vehicle, which can be as high as $12,500 and will surely boost adoption rates.

This measure provides compelling reasons why more Americans should consider switching over their current car fleet while also making it easier than ever before to do so without worrying about gas prices going up again tomorrow morning.

Near-Term Catalysts Are Pushing LCID Stock Up

With its innovative electric vehicle, Lucid Motors has ignited the stock market. The company announced deliveries of its high-performance luxury car with a 520 mile EPA rating in October. It was a landmark moment for Lucid Motors.

Lucid Motors has been hard at work for a few weeks now, and the company is already planning its next product. The Lucid Air luxury sedan was met with rave reviews from critics when it came out last year, but they will soon be releasing another vehicle — the Gravity SUV.

This high-tech sport utility could hit the market as early as 2023, if not sooner. Lucid Motors has 17,000 reservations for its first electric vehicle on the books. And there are plans to expand production to 20,000 vehicles next year.

Lucid Motors’ losses are anticipated to exceed $1.0 billion a year for two more years in the short term. However, with deliveries starting and new models planned out, the losses will narrow. The only issue is that the stock price has gained exponentially in the last few weeks on the back of positive announcements. Once the price cools down, LCID stock is an interesting EV play with legs to run.

On the publication date, Faizan Farooque 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.

Faizan Farooque is a contributing author for InvestorPlace.com and numerous other financial sites. Faizan has several years of experience in analyzing the stock market and was a former data journalist at S&P Global Market Intelligence. His passion is to help the average investor make more informed decisions regarding their portfolio.

Faizan Farooque is a contributing author for InvestorPlace.com and numerous other financial sites. Faizan has several years of experience in analyzing the stock market and was a former data journalist at S&P Global Market Intelligence. His passion is to help the average investor make more informed decisions regarding their portfolio.


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