- Lucid (LCID) cars gained street credit even before hitting the street.
- LCID stock, on the other hand, is on the skids on Wall Street.
- Management can change that by impressing with production milestones.
Every new hopeful electric vehicle company is trying to differentiate itself from the herd. For Lucid (NASDAQ:LCID), it seems it chose a swanky dealership name. But while a “studio location” is unusual for a point of sale spot, it’s not the special sauce behind LCID stock. Nor is it the longest range on a single charge, because eventually that advantage will fade. What is most special about Lucid’s strategy is that it is concentrating on international growth. The company is quickly focusing on broadening their reach even before starting.
But this brings the conversation back to the current bottleneck, which is production. Per the company forecast, their best effort this year will be fewer than 14,000 vehicles. In order to put a dent in Tesla’s (NASDAQ:TSLA) increasing advantage, it can’t miss a beat. Any news of delays on that front will certainly put serious dents in the LCID stock price.
On that front, so far it has been a wild ride for investors. But extreme situations almost always normalize in the long run. The fans love it too much, and the critics love to hate it almost as intensely. This raises the difficulty of dealing with Lucid stock for most normal investors. But we can choose to simplify things depending on our timelines.
Lucid’s Business Will Likely Succeed
Those looking for long-term returns should just ignore the short-term gyrations. However, such investors should still pay attention to their entry points to a certain degree. After all, it’s important is to make sure you’re not stepping into a hornet’s nest. The point is not to find surgically perfect entries, but to avoid the stints that are more obviously vulnerable than others.
For example, those who rushed into full positions late November were obviously buying into a prior failure zone. LCID stock had collapsed nearly 65% from those levels earlier that year. Their buy-and-hold argument probably was that in the long run it doesn’t matter. But if they had waited a bit they could have owned double the shares for about the same price.
In practical scenarios, prospective Lucid stock buyers don’t need to find a perfect bottom, but a reasonable one. Equity prices have been inconsistent, so it is best to take positions in small pieces. This leaves us room to add at different times to get a better overall average base price. Successful investors often use this method as a much better alternative than averaging down.
Fundamentally, LCID still doesn’t have much to offer other than massive expenses. This is understandable because it is bringing a brand new product to market. The company has already delivered its first wave of vehicles, but it hasn’t yet started to sell en masse. Meanwhile, its pre-sale orders are 25,000 strong, so demand will not be an issue.
Lucid is likely suffering from the global shortages, so management is not completely to blame. In other words, even though the company is falling short on some milestones, it’s not proof of incompetence. These temporary hindrances will hopefully abate soon and enable the company to operate under more moderate conditions. Even other EV companies, like Tesla, which has been selling for years, are finding the challenges too great.
Opportunity In LCID Stock This Quarter
Technically, LCID stock is showing an important line of support. The $20 level is too easy a mark for prospective bears. Even though the bulls have managed to hold it, if it fails, the downside potential could be significant. These are agnostic comments that would apply to any stock chart, so fans of LCID shouldn’t take offense to it.
If machines are truly in control of most of the action, this becomes a self-fulfilling prophecy. The bearish scenario has not triggered yet, but the bulls need to realize that it’s lurking. Luckily, buyers stepped into it at $16 last September, and the effort resulted in a 250% rally. On a potentially positive note, LCID may also have a more complicated bullish pattern that suggests a rally toward $34. However, those won’t patterns trigger on their own, and they would need help from other angles.
Most importantly, the stock market is teetering on edge this week for numerous reasons. If the indices can shrug off their worries, then LCID may fend off its sellers too. From a trader’s perspective, a dip into $16 may prove to be an opportunity to pounce on a tactical bullish setup. The idea from there is to attempt to double it. However, the term “tactical” means it’s not an investment, so it requires strict stop loss settings. From an investment perspective, the buy-and-hold crowd can ignore the short-term challenges.
On the date of publication, Nicolas Chahine held USDC, SOL and ETH. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.