When you see social-media traders chattering about California-based electric vehicle (EV) manufacturer Lucid Group (NASDAQ:LCID), it’s sometimes due to some really good news. Other times, however, it’s because LCID stock is dropping like a rock.
Lucid’s growth story has had its ups and downs, and growing pains ought to be expected. Nevertheless, the investing community isn’t always as patient as it should be with startup EV makers.
This seems to be the case with Lucid Group lately. The sentiment surrounding LCID stock has been negative, and traders seem to want to focus on just the negative data points that surface.
Audacious contrarian investors might see an opportunity here, though. Indeed, the negative sentiment can lead to a positive trading setup as Lucid’s apparent problems might not be as bad as they seem.
A Closer Look at LCID Stock
Not long ago, Redburn analyst Charles Coldicott issued a $39 price target for LCID stock. That’s ambitious, but is it realistic?
It would have been quite realistic at the beginning of 2022, when the Lucid share price was close to $41. After a persistent slide in the stock price, however, $39 looks like a high bar to clear.
In early March, LCID stock was slightly below $25 and the price trajectory was definitely to the downside. A momentum or “momo” trader might choose to avoid this stock due to the technical damage that’s been done.
On the other hand, Lucid shares have a 52-week range of $16.12 to $57.75. Value hunters and contrarian traders sometimes like to buy stocks near their 52-week lows.
LCID stock is much closer to the low than the high of range, so it could be considered a bargain. Still, it’s important to check Lucid’s financial health before placing a trade – and we can start conducting our due diligence right now.
From New Jersey to Saudi Arabia
For one thing, it’s a good sign when a start-up business is expanding into new locations. In Lucid Group’s case, we’re talking about a company that’s planting its flag on more than one continent.
Impressively, Lucid has 22 locations in North America. The most recently established location is in Short Hills, New Jersey.
According to Zak Edson, vice president of sales and service at Lucid, the establishment of the Short Hills location represents a larger venture into a regional U.S. market.
“This location is the first in a series of Studio and service center openings in the Northeast United States, expanding our presence beyond our flagship Studio in Manhattan,” Edson explained.
Now turning our attention to an entirely different region of the world, Lucid Group recently disclosed that it’s laying the groundwork for a full production factory in Saudi Arabia.
It’s an ambitious plan, to say the least. Apparently, Lucid is targeting production of 150,000 vehicles per year at the proposed Saudi manufacturing facility.
A More Realistic Target
Despite these exciting news releases, some folks are still choosing to divest their LCID stock shares.
This may be due to Lucid’s late-February data release. In it, the company had some good news to share:
- Customer reservations exceeded 25,000, representing sales of more than $2.4 billion.
- Vehicle production surpassed 400 units as of Feb. 28, 2022.
- Lucid reported 125 customer deliveries as of year-end 2021, and over 300 deliveries to date (as of Feb. 28).
- Fourth-quarter 2021 revenue totaled $26.4 million.
- The company had roughly $6.2 billion worth of cash and cash equivalents at the end of 2021. That’s a vast improvement over the approximately $640 million recorded at the end of 2020.
There’s enough positive data here to build a compelling bullish thesis for LCID stock. However, some investors may have chosen to focus on this statement from Lucid CEO Peter Rawlinson:
“Looking ahead, we’re updating our outlook for 2022 production to a range of 12,000 to 14,000 vehicles. This reflects the extraordinary supply chain and logistics challenges we’ve encountered and our unrelenting focus on delivering the highest-quality products.”
Earlier, Lucid had expected to deliver 20,000 of the company’s Air sedans in 2022. Still, it makes sense for Rawlinson to take supply-chain issues into account and to issue a more realistic, attainable production target.
The Bottom Line
Should traders punish Lucid Group for its lowered expectations? Maybe not, since now the company can deliver on its promise, and then some.
Besides, Lucid is clearly in growth mode, in more ways than one. The company is expanding into new territories, and is reporting an increase in customer reservations.
Will you choose to view the glass as half-empty, or half-full? The decision is yours, but there’s enough good news here to maintain a long position in LCID stock with confidence.
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.
