High Enthusiasm Could Prevail for Lucid Group Despite Market Volatility

With growth and meme stocks selling off in response to the Federal Reserve’s rate hike plans, you’d think a high-flier like Lucid Group (NASDAQ:LCID) would be making similar moves. But compared to other electric vehicle (EV) stocks and popular retail-trader plays, LCID stock has seen only a moderate pullback.

The Lucid Motors (LCID) Plant in Arizona.

Source: Around the World Photos / Shutterstock.com

Year-to-date (YTD), it has basically treaded water. In contrast, another heavily-hyped early-stage EV play, Rivian (NASDAQ:RIVN), has taken a harder dive. It’s down more than 40% YTD.

Compared to its fellow meme plays, LCID stock’s pullback has been relatively small as well. Meme stock leaders like AMC Entertainment (NYSE:AMC) and GameStop (NYSE:GME) have each seen declines similar in size to that of Rivian’s plunge since the start of 2022.

Overall, the prospect of higher interest rates is compelling investors to cash out of more speculative stocks that are valued on hope, hype and potential more than fundamentals. Yet while Lucid belongs more in the “hope and hype” category, why isn’t this change in the market affecting it?

Considering how much progress it made last year, investors remain excited that Lucid will continue to meet and beat high expectations in 2022. As long as this sentiment holds, it may be enough to counter further market-wide declines.

If the stock market starts to stabilize after its drop driven by rate hikes, the popular EV play may have the ability to make a fast trip back to its past all-time high.

Why LCID Stock Is Holding Up Amid Volatility

Admittedly, I may be making it sound like changes in the market have had zero impact on Lucid shares. I’ll concede that the stock, at around $36.75 per share, is down a fair amount from where it was in November.

As you likely recall, the infrastructure bill helped reignite excitement for EV stocks. This revved up LCID stock back to prices above $50 per share. It didn’t return to its past high-water mark ($64.86 per share), but it came close. As the latest wave of the EV trend faded, it naturally moved lower, as was seen with names like Rivian.

However, since then it’s remained relatively steady. The stock has found a floor in the mid-to-high $30s per share. In contrast, RIVN stock has stayed in freefall. So, too, has another electric vehicle startup, Fisker (NYSE:FSR). Again, chalk it up to all the progress it made in recent months.

As Louis Navellier recently discussed, Lucid’s recent progress includes making its first deliveries in the United States. Also, it’s continuing to build up its backlog of reservations.

On top of this, its flagship Air luxury sedan model won Motor Trend’s “Car of the Year” award. In the eyes of the market, these achievements may set the stage for even more accomplishments throughout this year.

Retail Investors Remain Electrified for Lucid

With its fast move from the pre-revenue stage to the revenue stage, retail investors are still electrified by LCID stock. They’re highly confident that it will hit milestones quickly in 2022, like it did in 2021. Upcoming milestones include producing 20,000 vehicles and expanding into the European market.

So, does that mean the stock’s gearing up to surge back above $50 — or perhaps even $60 — per share? It depends. Excitement for the company’s prospects is helping to counter the market uncertainty putting pressure on growth stocks. Even so, it hasn’t outweighed it.

If the stock market stays volatile as Federal Reserve policy grows increasingly hawkish, further volatility could prevent Lucid shares from rising again.

On the other hand, if the market’s negative reaction to Fed policy has already peaked, a full-on rebound may be in store as the dust settles. Assuming it hits one or several of its next key milestones, LCID stock may be back on its way toward its all-time high.

Buy LCID Stock If You Believe the Enthusiasm

In the past month, my past thesis on Lucid (that rate hikes would sink it) hasn’t really played out. Instead, shares have held steady. Excitement for its future has been enough to prevent the fear, uncertainty and doubt in the markets from tanking its price.

That said, there’s no guarantee the current sentiment on Lucid will hold. Hiccups or setbacks could cause investors to change their take on it, sending LCID stock in reverse. But if you believe the company’s successes over the past few months mean it will continue to crush it without skipping a beat, buy it today.

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.


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