Electric vehicle stocks have been taking a beating. The world right now is focused on the short-term effects of high oil prices. Most are forgetting however the still intact long-term secular trend of moving away from fossil fuels.
It’s in this backdrop that an opportunity presents itself. I believe certain EV stocks are now selling at a discount. One such stock is Lucid (NASDAQ:LCID). The company’s stock fell from a high of $47.8 in 2022 to its current price of $21.55.
Lucid Fails to Deliver
Apart from LCID stockholders having a rough time, the company itself has been facing operational difficulties. Lucid had missed its delivery target for 2021. The company had targeted to deliver 500 cars in 2021. However, it only managed to get 125 cars to its customers.
The company has revised down its guidance for 2022 — no doubt in an effort to be more conservative. The new production target for 2022 is between 12,000 to 14,000 vehicles. This new forecast is dramatically lower than its previous goal of 20,000. Investors sold off the company’s shares after the announcement. LCID stock dropped 13% that same day.
Management blamed the production shortfalls on extraordinary supply chain and supply quality challenges. Indeed many manufacturing companies had been mired by such challenges. But Lucid’s somewhat unique case as a “start-up” made it more susceptible.
Most companies had supply issues but few missed their delivery targets by more than 50%. This is part of the “growing pains” that will continue to plague the company in the near future. Remember it wasn’t too long ago that Tesla (NASDAQ:TSLA) had to endure something similar. I expect Lucid to go down this same path.
Despite the production miss, I believe that Lucid is still among the most promising up-and-coming electric vehicle manufacturers. The company has built 400 Air sedans to date — 300 of which are in the hands of customers. Most customer reviews have been glowing thus far reflecting the quality and craftsmanship of these vehicles. Lucid has reported more than 25,000 reservations which translates to around $2.4 billion in sales. Using this number, LCID stock is at a reasonable for a growth stock valuation of 16x sales.
EVs Continue to Be a Priority at the White House
The market dip has given investors a lot of fear, uncertainty, and doubt. But despite the chaos in the market and the shock of high oil prices, the long-term secular trend remains bullish for electric vehicles. In fact, President Joe Biden’s administration isn’t keen on reversing its stance on electric vehicles.
This administration has been levying regulations on the oil and gas industry thus limiting domestic production. The war in Ukraine exacerbated the lack of supply thus causing a massive price hike in oil and gas.
The Biden administration rather than pushing domestic oil production is focusing on an electric vehicle future. Transportation Secretary Pete Buttigieg claimed in a press conference that, “rural to suburban to urban communities can all benefit from the gas savings of driving an EV.” In other words, ditch your gas guzzler and switch to an EV.
While the price tag of a Lucid Air may be a bit out of reach for most Americans, this can still be a bullish development for the company. The White House is planning to drastically expand charging station access across the country.
There could also be new EV tax credits to help middle-class Americans buy their first EV. The Build Back Better bill had tax incentives of up to $12,500 per vehicle to accelerate the adoption of electric vehicles. This part of the bill could be introduced as separate legislation in response to soaring gas prices.
Your Takeaway
While LCID stock has not gained any bullish momentum just yet, the long-term outlook on the company is still very bright. I wouldn’t rush out to buy right now at these prices. The technical picture of the stock still looks very weak.
This is where patience comes in for investors. I believe LCID stock should be on your watch list.
On the date of publication, Joseph Nograles 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.
