Lucid Is Making Progress, But It’s Still Not a Buy

LCID Stock - Lucid Is Making Progress, But It’s Still Not a Buy

Source: gg5795 / Shutterstock.com

  • Lucid (LCID) has issued a lot of positive news lately, including a big deal with the government of Saudi Arabia.
  • However, the company continues to struggle to ramp up and scale production of its electric vehicles.
  • Avoid LCID stock as it continues to fall lower, having tumbled 66% since the start of the year.
Exterior of Lucid Motors (LCID) building

Source: gg5795 / Shutterstock.com

Lucid Group (NASDAQ:LCID) has reported a spate of positive news in recent weeks. This raising the question of whether LCID stock is a bargain and worth purchasing at current levels.

Its shares have fallen far this year, down 66% since the beginning of January. LCID stock is now down 76% from an all-time high of $57.75 reached last November.

While the pullback has been ugly, it has a lot to do with the current downturn in the entire market and hasn’t factored in a lot of the good news that has come out of the EV maker in recent weeks. Is there a buying opportunity here, or is Lucid destined to continue falling?

LCID Lucid $13.86

Lucid’s Latest Deal

The good news for Newark, California-based Lucid started on April 27. At the time, the company confirmed it had secured an order to provide the government of Saudi Arabia with up to 100,000 of its electric vehicles.

The order is sizable for Lucid, which is a startup company that makes high-end electric sedans and SUVs. It’s viewed as a main competitor to Tesla (NASDAQ:TSLA).

The deal with the Saudi Arabian government will see it buy up to 100,000 of Lucid EVs over the next 10 years. Under the terms of the deal, the country’s Ministry of Finance will purchase at least 50,000 Lucid vehicles over the coming decade, with an option to purchase an additional 50,000. The vehicles will include some built in Arizona, as well as at a new factory Lucid plans to build in Saudi Arabia.

It should also be noted that Saudi Arabia’s public wealth fund has a 62% stake in Lucid.

More Good News for LCID Stock

In releasing its latest financial results on May 5, Lucid said that it now has more than 30,000 reservations for its Air sedan, the first vehicle that is being produced at the company’s manufacturing hub in Arizona.

The company also announced it is raising prices on the Air sedan as of June 1. Starting next month, pricing on the various Air models will increase by 10% to 12%, depending on the trim level. The base model Lucid Air currently retails for $77,400.

Lucid began deliveries of the Air electric sedan last October and the vehicle has won rave reviews, including winning Motor Trend’s coveted Car of the Year award. However, the company has struggled to increase production amid a global supply chain crunch that has made it difficult to source and acquire parts.

As a result, Lucid in February of this year lowered its full-year guidance for production to between 12,000 and 14,000 vehicles from 20,000 vehicles previously. That downgrade helped prompt the current selloff in LCID stock.

In terms of its earnings, Lucid Group reported that it lost 5 cents per share in this year’s first quarter on revenues of $57.7 million. However, the company ended Q1 with nearly $5.4 billion of cash on hand, which it said is sufficient to fund the company well into 2023.

Don’t Buy LCID Stock

There’s no question Lucid has experienced some positive developments recently. Orders for its Air sedan remain buoyant and the deal with the Saudi Arabian government should help the company for years to come.

That said, Lucid Group remains a startup that is struggling to scale its business and remains unprofitable. In short, it’s the type of stock that the market is rejecting right now.

Given the broad-based selloff that is roiling stock markets right now, there is a good chance things will get worse for Lucid’s share price before they get better. As such, investors would be best advised to steer clear of LCID stock for now.

On the date of publication, Joel Baglole 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.

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.


Article printed from InvestorPlace Media, https://investorplace.com/2022/05/lcid-stock-is-making-progress-but-its-still-not-a-buy/.

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