Lucid Is the Worthy Tesla Challenger Investors Have Been Waiting For
The broad-based selloff in the tech sector has battered several innovative startups. One such name is up-and-coming luxury electric vehicle (EV) company Lucid Group (NASDAQ:LCID). LCID stock has shed 35% of its value over the past three months. Despite its impressive progress and incredible outlook ahead, investor enthusiasm remains at a low ebb. Hence, it’s an ideal time to pounce on this stock.
Growth stocks have taken a beating amidst political tensions between Russia and Ukraine as well as challenging macroeconomic conditions. The end of the stimulus package and rising inflation rates also spell trouble for growth-oriented picks.
That said, Lucid Group is expected to ramp up production in the next couple of years. It will invest a cash pile of roughly $7 billion to expand its production capacity and potentially enter new markets. So, despite broader worries, there’s plenty to be excited about with LCID stock.
LCID Stock: Production Ramp and Expansion
For starters, Lucid has the funds for its expected production and delivery ramp in the next couple of years. The September quarter ended with $4.8 billion, but the company later added $2 billion in a senior note offering. With cash of more than $6.8 billion, LCID is arguably one of the most financially flexible EV companies.
In terms of expansion, Lucid plans to enter into multiple markets outside of its home in the United States. For example, the company plans to foray into highly lucrative China, which boasts some of the highest EV adoption rates globally. The Chinese government plans to have more than 20% of all new cars be EVs by 2025.
Moreover, Lucid also has immense potential in the European market. In 2021, battery EV registrations in Germany alone grew 83% year-over-year (YOY). This stat suggests that EV purchases formed a substantial proportion of new vehicle sales in the country last year. If Lucid announces an expansion into the fast-growing European market, it could further solidify the bull case for LCID stock.
Finally, the Saudi Arabian market is another trump card. Saudi Arabia’s Public Investment Fund (PIF) has billions invested in the company. Lucid has also been in talks about building a manufacturing facility in the region. That should fuel future growth.
The Year of Execution
This year is one of execution for the company. Lucid will be focused on nailing its flagship Air sedan’s initial deliveries. It will also be looking to ramp up production volume and gain market share.
Meanwhile, investors will want to monitor its ability to execute the objectives set out in its business plan. Lucid reported massive growth in Air reservations in the last quarter. Specifically, reservations increased by more than 4,000 from the September quarter, up to 17,000 by mid-November. Management’s reaffirmation of its 2022 production guidance for 20,000 deliveries will also be a major catalyst for LCID stock. Any updates to its reservation numbers will also bolster investor confidence.
On top of this, the upcoming earnings call should touch on the company’s progress concerning its DreamDrive advanced driver assistance system (ADAS) and Gravity SUV. Considering the Air’s robust range of capabilities, investors will also be looking for similar details with the Gravity regarding performance, charging time and other related elements.
As its first-ever production car, the Lucid Air has been met with exceptionally positive reviews and ratings. However, there are still many risks involved in scaling up manufacturing capacity as well trying to become more popular among consumers. That could slow down growth significantly.
When production and delivery delays occur, it can have a significant impact on how shares of a company are perceived in the market. Any kind of setback or delay with customer deliveries will likely weigh heavily against the prospects of LCID stock. This holds true whether the issues come from internal struggles or external forces.
The Final Word on Lucid Group
All told, investors will be keeping a close eye on Lucid’s performance in the coming months. The colossal $2 billion capital raise signals that more investments will be coming. If the company can nail its objectives — including accelerating its expansion plans — LCID stock could be a major winner this year.
On top of this, the release of the company’s new models could usher in a new era of growth for Lucid as it enters into new niches. Therefore, the recent pullback presents an excellent opportunity to load up on the stock.
Shares went through a significant drop in price in the last three months and are still broadly oversold today. As such, right now is the perfect time to invest in this Tesla (NASDAQ:TSLA) challenger. There’s more room for the stock price to come back up.
On the publication date, Faizan Farooque did not hold (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.
Faizan Farooque is a contributing author for InvestorPlace.com and numerous other financial sites. Faizan has several years of experience in analyzing the stock market and was a former data journalist at S&P Global Market Intelligence. His passion is to help the average investor make more informed decisions regarding their portfolio.
