After a difficult start to the year, electric vehicle (EV) manufacturer Lucid Group (NASDAQ:LCID) is rebounding and setting up a nice opportunity with LCID stock.
Currently, LCID stock is down about 27% year-to-date (YTD) at around $28 per share. However, despite a big decline in January, Lucid remains up more than 17% over the last six months. It has also climbed 3% higher since hitting a trough of $27.15 on Jan. 28.
This stock looks set-up for a nice recovery in the near-term and the company’s positive outlook could make for a solid long-term investment as well. Analysts have turned incredibly bullish on the EV maker following the January pullback. For example, Citigroup recently upgraded the stock to a “buy” rating and gave it a $57 price target. That’s more than double its current price.
LCID Stock and the Investigation
To be fair, the drop in LCID stock wasn’t entirely due to market gyrations in January. Rather, Lucid started to decline in December after the U.S. Securities and Exchange Commission (SEC) announced it was investigating the carmaker’s combination with the special purpose acquisition company (SPAC) that took it public last July. The share price fell as much as nearly 20% immediately after the news hit. The exact details of the probe have not been disclosed, but the regulator has also announced investigations into the SPAC deals of other EV names like Lordstown Motors (NASDAQ:RIDE).
Lucid’s leadership team has said they are cooperating with the SEC investigation. However, the news still managed to tarnish what was an otherwise very strong debut for LCID stock, which had run up nearly 150% between July and the end of November 2021. No doubt, the SEC investigation will continue to hang over the company and its share price until a resolution is reached.
But that’s not all. Back in December, LCID also took a hit after the company announced it would offer $1.75 billion in senior convertible notes. Basically, Lucid is taking on debt to fund its fast-growing operations. That’s viewed as a negative by many investors and analysts. The stock fell 5% when the debt issue was announced.
Big Ambitions
Lucid has said that it needs the money raised through the recent debt issue to help fund its ambitious production schedule. The company’s first vehicle, the Lucid Air, began rolling off the assembly line last October. However, it doesn’t stop there. Lucid has already announced plans to have its next vehicle — the Gravity luxury SUV — available for delivery in early 2023.
Lucid told analysts that it plans to produce 20,000 EVs this year and more than double that production level to 50,000 vehicles by the end of 2023. That’s an aggressive ramp-up, to be sure, but the company is confident it can meet targets. It has forecast sales of more than $2 billion in the current year.
And it’s not all talk. The Air, for instance, is winning plaudits from the automotive industry. MotorTrend named the vehicle its 2022 “Car of the Year.” Reviewers praise the car’s luxury appointments and love its industry-leading, single-charge 520-mile driving range.
Many on Wall Street continue to see Lucid as the only legitimate competitor to current industry leader Tesla (NASDAQ:TSLA). While the company has encountered some speed bumps in recent months — and while LCID stock has been badly beaten down in the current market downturn — the long-term outlook here remains largely positive. After all, most EV startups never even get to the production stage of development.
Buy the Dip in Lucid Group
The price of LCID stock looked cheap when it first started to fall in December. Now, it looks like even more of a bargain. At under $30 per share, it offers a nice entry point for new investors.
Of course, risks remain. But the company is also in full production mode and its first vehicle is winning some serious praise. With Lucid now expanding into Europe and an electric SUV slated to enter production shortly, the prospects look encouraging. Considering all of these reasons, LCID stock is a buy.
On the date of publication, Joel Baglole held a long position in C. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Joel Baglole has been a business journalist for 20 years. He spent five years as a staff reporter at The Wall Street Journal, and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia.
