There still isn’t a ton of data with which to determine where Lucid (NASDAQ:LCID) stock is headed in 2022. The company went public back in July, quickly built out in-house manufacturing, has begun delivering vehicles, and continues to expand and make progress.
Yet, it is clear that despite that progress, Lucid will be full of ups and downs. Case in point: LCID stock jumped when its third-quarter earnings were released in mid-November. And any time electric vehicle (EV) projections look strong, Lucid tends to move upward in kind.
But then, as in early November, issues crop up.
SEC Probe
It was on Dec. 6 that the Securities and Exchange Commission (SEC) subpoenaed Lucid. Unsurprisingly, LCID stock suffered sharply.
The SEC is specifically looking at projections and statements made prior to the firm coming public. That is clearly worrisome to investors of all stripes. However, there is something of a silver lining in the news: The SEC is casting a wide net of scrutiny over projections made by many companies that went public via SPAC, not Lucid alone.
In the EV space alone, the SEC had prior launched investigations into Lordstown Motors (NASDAQ:RIDE) and Workhorse (NASDAQ:WKHS), not to mention the fiasco with Nikola (NASDAQ:NKLA).
Although the firm has agreed to fully cooperate, Lucid continues to trade at lower levels following the subpoena. But on the other hand, there’s plenty of reason to believe in Lucid as well.
Plenty of Optimism
Lucid is broadly doing well in my mind. Investors who look back to its Nov. 15 earnings report may agree.
On the one hand, Lucid hardly saw any revenue, recording only $232,000 in revenue in the quarter. That was even less than the $334,000 in revenue it recorded a year prior. Further, Lucid suffered a net loss of $524.4 million in the quarter, and a comprehensive net loss of $1.534 billion through the first three quarters of 2021.
That isn’t great, but that’s not what investors really care about now. It’s more about the fact that Lucid is cash heavy now and is producing vehicles. The narrative isn’t financially tight operations, it’s the speed with which Lucid has accomplished its goal of bringing a Tesla fighter to market.
It reported $4.796 billion in cash equivalents to end Q3. That suggests that it has plenty of runway given that it doesn’t have to build another greenfield manufacturing plant anytime soon. It can direct that cash toward smoothing early deliveries and other efforts.
The 17,000 reservations it has should equate to roughly $1.7 billion in revenues. There’s plenty of reason for optimism.
Hype Still Dominates
I’d be remiss to not acknowledge that hype still dominates. Most people who follow the EV space at all know that subjective concerns are highly important right now. It isn’t as much hard numbers as accolades and perception.
Dominant names in the vehicle industry are on board with EVs, and that matters. The Lucid Air was named MotorTrend’s car of the year for 2022. And not long after that, Rivian’s (NASDAQ:RIVN) R1T truck was named its truck of the year.
There is no doubt that a tide of optimism has swept the EV market higher and its broad adoption has already occurred. So, hype or not, EVs have a strong market moving forward.
What to Do
Because Lucid has been picked as a favored son, I think it makes sense to make a bet now. Prices are lower now due to scrutiny and other factors. View that as an opportunity. It still looks like a long-term winner overall.
It’s fair to assert that Lucid will cut into Tesla’s (NASDAQ:TSLA) position within the luxury EV market. It isn’t if, but by how much. You have to believe that LCID shares will rise because of that.
On the date of publication, Alex Sirois 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.
Alex Sirois is a freelance contributor to InvestorPlace whose personal stock investing style is focused on long-term, buy-and-hold, wealth-building stock picks. Having worked in several industries from e-commerce to translation to education and utilizing his MBA from George Washington University, he brings a diverse set of skills through which he filters his writing.
