Lucid Must Hit Production Goals to Be a Long-Term Buy

Lucid Motors (NASDAQ:LCID) is a fairly new electric vehicle stock in the market. The company has been around for more than a decade but it went public in 2021 through a special purpose acquisition company, or SPAC merger with Michael Klein’s Churchill Capital Corp IV. Since then, LCID stock has seen many ups and downs.

Unfortunately, 2022 hasn’t been kind to most companies, including LCID.

Once trading as high as $57, the stock has been trading at or below $20 for quite some time now. I think that any level below $20 can be a good entry point. LCID stock has been struggling to hold onto $20 since the end of April and I believe it will take some time for the stock to rebound. However, take this as an opportunity to buy LCID stock. Let’s dig deeper into my thesis on the stock.

Short-Term Picture Looks Attractive

Lucid might take longer to prove its worth in such a competitive industry but it is unlikely to fail in the short term. This is due to the backing from Saudi Arabia and an investment worth $3.4 billion in the company.

It proves that the company will have enough cash in the near term, which it can allocate towards expansion and building more manufacturing facilities. It has 100,000 vehicle orders from the Saudi government and they will be fulfilled in the next 10 years.

Besides that, the company has 30,000 customer reservations, meaning more than $2.4 billion in potential sales. And even if half of them materialize into actual sales, the revenue number will be significant.

For this year, the company plans to make fewer vehicles and this could be due to supply chain disruptions. But Lucid will have to prove itself by hitting the revised projection of 12,000 to 14,000 vehicles, against the original projection of 20,000.

Lucid has enough cash to help it get through 2023 and it has enough orders to keep going for the next few years. The short-term picture will not disappoint you, but if the company is unable to ramp up production and hit strong numbers in the coming years, it could affect the bottom line.

For the short-term, LCID stock can generate moderate returns at low risk.

What to Do With LCID Stock?

Yes, the company is facing a challenging time and the investor sentiment towards the EV industry hasn’t been positive either. However, this does not mean that you can write off Lucid. The consistent rise in the number of deliveries reported by EV makers shows that there is a growing demand out there and people are willing to pay for EVs. If Lucid can manage to stick to the production schedule and deliver as promised, it will have a long runway ahead.

But the “if” remains, and it will continue to remain until we see action. If you have the patience to wait for a few more months and are a short-term player, bag the stock below $20 and hold for a while to see results. However, if you are looking for a more stable and long-term EV play, there are other companies to consider.

On the date of publication, Vandita Jadeja 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.