Is luxury electric vehicle maker Lucid (NASDAQ:LCID) a stock to buy for your retirement portfolio? Absolutely not. However, if you’ve got some fun money lying around, LCID stock appears to be a speculative buy in the mid-to-high $30s.
It recently laid out some of its expansion plans. Saudi Arabia appears to be in the cards for a production factory. That’s excellent news for two reasons.
LCID Stock and Lockup Expiration
InvestorPlace’s Eddie Pan recently discussed the end of Lucid’s lockup period on Jan. 19. Approximately 74% of its outstanding shares held by insiders and legacy investors can now be freely sold after the lockup’s expiration.
Pan pointed out that lockup expirations make investors jittery. After all, if every shareholder associated with Lucid’s lockup expiration (1.19 billion) decided to sell en masse – not a crazy idea considering the Nasdaq composite ended Jan. 18 trading below its 200-day moving average for the first time since April 2020 – the LCID share price would most likely fall by several dollars or more.
But LCID stock merely moved sideways since the lockup expiration. Of course, that doesn’t mean investors won’t start selling in the weeks ahead, but for now, this was a non-event.
There are two reasons speculative investors ought to be contemplating a buy at current prices under $40.
Lucid’s Saudi Plans
Do a web search for “Lucid plans Saudi Arabia,” and you get an avalanche of news stories about Chairman Andrew Liveris’s recent comments on Bloomberg Television about its plans for Saudi Arabia.
“Now that we are successfully producing and selling cars in the U.S., our attention is turning to this factory here,’ he said at a mining conference in Riyadh.
Lucid is negotiating with the Public Investment Fund (PIF), Saudi Arabia’s sovereign wealth fund, on the terms for building a production factory 60 miles north of Jeddah. The second site possibly is Neom, a new smart city on the Red Sea in the northwest part of the country.
Liveris suggested that the factory could be up and running as soon as 2025. By then, Lucid could be producing more than 100,o00 vehicles annually from its existing AMP-1 facility in Casa Grande, Arizona. He also suggested that much of the money for the plant would come from Saudi’s sovereign wealth fund. We could know more in the next few months.
Why Saudi Arabia?
Given Saudi Arabia’s track record for human rights, if you’re at all concerned about environmental, social and governance (ESG) investing, the idea that Lucid is headed to Saudi Arabia ought to have you scurrying for the exits. This is not the place you want your money if you can help it.
However, if you’re a contrarian, and see this move as part of a bigger plan to get the Middle East off fossil fuels, then maybe, I could see you possibly holding your nose despite the stench. But I digress.
There are two reasons Saudi Arabia makes sense.
The first is that Saudi Arabia, in terms of Lucid EV pre-orders, is the company’s second-largest market behind the U.S. CEO Peter Rawlinson confirmed this last October while in Riyadh for an investment conference.
Reuters reported on Rawlinson’s comments:
“It’s really my dream (to) help catalyze the genesis of an EV industry here in the kingdom,” he said at the Future Investment Initiative conference in Riyadh, adding sustainable transport would benefit everyone.
It makes sense to go where your customers live. At $169,000 or more for a top-of-the-line Lucid Air Dream Edition R, there are many wealthy people in the Middle East to buy up the local production. So it makes total sense from a planning and economic standpoint.
The second reason is that PIF already owns 63% of the company. It’s in the proverbial driver’s seat on this issue; if your very wealthy largest investor wants to throw billions of dollars toward a second factory, who is Rawlinson to argue?
The Bottom Line
As a speculative buyer of Lucid stock – I say speculative because it has little in the way of revenue and lost $1.5 billion through the first nine months of fiscal 2021 – the fact that PIF is willing to double down on its bet should be all you need to buy some shares now before the details are ironed out and released to the general public.
Once the plans become official, barring PIF changing its mind before 2025 or 2026, LCID stock is likely to move higher regardless of how much money it loses.
I continue to believe LCID is an excellent long-term speculative buy.
On the date of publication, Will Ashworth 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.
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.