Lucid Group (NASDAQ:LCID) stock is trading more than 30% lower than its 52-week high price of $64.86. The up-and-coming EV stock is still trading at a premium, though, but is more reasonably valued now. Moreover, as it looks to ramp up production this year, LCID stock could be back with a bang in no time.
The company has developed an incredible reputation as a luxury EV manufacturer. It’s positioning itself as a major player down the line with a differentiated product line. Moreover, Lucid has more than $4.5 billion on its books to boost its production line.
Despite Lucid’s incredible pre-order performance and solid prospects ahead, it is valued at a fraction of Tesla’s market capitalization. Hence, LCID stock continues to be a fascinating EV play at this time.
Taking Things Up a Notch With LCID Stock
Lucid has shown incredible engineering prowess to become a leading luxury EV maker. Its Air Dream recently won the 2022 MotorTrend Car of the Year award. Moreover, it has huge advantages over Tesla (NASDAQ:TSLA) in terms of horsepower and range, making it a compelling competitor. Becoming a “range king” is a testament to its management solid execution and robust ability to innovate.
Deliveries of the company’s first car, the Lucid Air, began last year. The Lucid Air is expected to ramp up its deliveries this year. As of November, the company had over 17,000 reservations, with a 30% improvement from September. It could potentially add another few thousand reservations from November until the fourth-quarter earnings in February.
Furthermore, Lucid is looking to grow its production capacity in Arizona to embark on the second phase of its expansion project. Once the second phase is complete, the company could produce up to 90,000 vehicles. It could potentially deliver 20 to 25,000 EVs this year, which could grow to 34,000 by 2023.
With all the positives with Lucid, a few risks need to be considered. Firstly, the company recently received a query from the SEC requesting information regarding its SPAC merger. The development led to a sell-off, and given how scandals have annihilated EV companies of late, it wasn’t surprising. EV companies have the tendency to exaggerate their capabilities. Nevertheless, the development could impact LCID stock this year as well.
Lucid’s valuation is also a cause for concern. It’s trading over 15 times higher than its book value. The valuation is significantly higher than its deliveries, but Lucid could deliver an incredible 34,000 EVs annually in a couple of years. Hence, it will eventually grow into its valuation as it ramps up deliveries over the next couple of years.
Lucid’s 2022 performance could be a litmus test for the future. It will ramp up production of several Lucid Air models this year, and the market will be looking to gauge their performance be keenly following the proceedings. Production delays and other related issues could significantly weigh down LCID stock. Moreover, scaling production while maintaining its financial flexibility will be a massive challenge as well.
Bottom Line On LCID Stock
Lucid will be under the scanner as it looks towards the mass production of its vehicles. It is likely to be a critical year for its long-term success and its ability to attract long-term investors. However, all evidence points to Lucid’s success, as it looks to become a juggernaut in the luxury EV space. It will be imperative for the company to execute well; otherwise, things could get rough for its stock. Nevertheless, after the recent sell-off, LCID stock looks highly attractive at this point.
On the date of publication, Muslim 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