California-based electric vehicle manufacturer Lucid Group (NASDAQ:LCID) seeks to disrupt the market with cars that look amazing and deliver outstanding power and range. That’s exciting, but it hasn’t always been easy to hold LCID stock.
Don’t get me wrong – there were some good times in 2021. Among the highlights was when Lucid Group joined the prestigious Nasdaq 100 index in December.
On the other hand, there were frustrating times as well, such as when LCID stock took a 50% haircut in early 2021. As that year was wrapping it, it appeared that a similar drawdown might be in progress.
Today, however, Lucid’s shareholders are undoubtedly glad to watch the stock make a comeback. Yet, while a turnaround is certainly welcome, it’s important to keep your enthusiasm in check, lest it morph into greed.
A Closer Look at LCID Stock
During the heady days of early 2021, LCID stock made a round trip from $22 to $60 and back. At that time, the stock was more appropriate for short-term trading than for a buy-and-hold position.
Fast-forward to 2021’s fourth quarter, and the buyers pushed the Lucid share price up toward $60 again. As they say, the market doesn’t necessarily repeat itself, but it definitely rhymes sometimes.
In December, it looked like LCID stock would fall back into the $20s again – yet, this isn’t what actually happened. Thankfully, the buyers rushed in and held the stock in the $40s.
Indeed, the stock was on an upswing in early January, so maybe a full recovery is in progress. If you choose to invest now, however, it’s not a terrible idea to take profits at $60.
Remember, the idea is to buy low and sell high, not to buy stocks at resistance points and then learn your lesson the hard way.
Before moving on to more cautionary notes, we can deliver the good news first.
To that, Lucid replied, “Expansion to European markets will begin this year. Stay tuned for country-specific delivery information.”
It’s interesting, and perhaps unexpected, that Lucid Group would choose to make that announcement through social media, instead of via an official press release.
But hey, at least now Lucid’s European fans have an idea of what to expect. It’s effectively the company’s update on an ongoing story, as Lucid began accepting online reservations in 15 European countries for the Air back in January 2020.
At that time, Lucid hadn’t specified when those vehicles would be delivered. So, the aforementioned tweet at least provides some clarity on that matter.
Check the Financials
Delivering cool-looking cars is one thing; profiting from those deliveries is another matter entirely.
When listening to the chatter about Lucid Group on social media – including the many replies to the tweet mentioned above – there’s a distinct impression that some folks are over-leveraging themselves on LCID stock.
That’s not the best way to invest in Lucid Group, or in the EV revolution in general. This is still a relatively new technology, and Lucid still has yet to prove that it will be a profitable enterprise.
I hate to be the bearer of bad news, but Lucid Group has moved away from profitability, not toward it. Consider this: in the nine months ending on Sept. 30, 2020, Lucid incurred a net earnings loss of $408.1 million
In the same period of 2021, Lucid Group’s net earnings loss ballooned to a staggering $1.53 million.
So, Lucid’s investors should watch the company’s upcoming earnings reports carefully. Read the fine print and focus on the bottom-line results.
The Bottom Line
It can be tempting to get caught up in hype and excitement sometimes. However, buying stocks at key resistance levels can be a costly mistake.
Lucid is producing cars that look great and perform well, there’s no denying it. The company still needs to demonstrate its fiscal viability, however.
In the final analysis, it’s fine to take a long-term position in LCID stock. Just don’t get greedy if the share price returns to the $60s, and understand that any position in Lucid Group is highly speculative.
On the date of publication, David Moadel 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.