Steer Clear of Lucid Stock or Brace Yourself for Serious Portfolio Pain
There’s good news and bad news in July to report for electric vehicle manufacturer Lucid Group (NASDAQ:LCID). The optimists will choose to see the glass as half-full, but LCID stock is vulnerable to a near-term decline.
Unless Lucid Group strikes EV-market gold in the Middle East, the automaker and its shareholders could be in trouble.
You may have heard that Lucid Group is making a move into China’s EV market. Recent news suggests that Lucid is planting its flag in an entirely different region of the world. It’s important to keep tabs on this development, no doubt.
Lucid Group’s foray into a far-away EV market shouldn’t convince you to buy Lucid stock in 2023.
Delivery Miss Spells Trouble for LCID Stock
If you’re eager to load up on LCID stock, consider this discouraging news item first. Lucid Group issued a press release recently with EV delivery results that don’t bode well for the company.
Specifically, Lucid Group produced 2,173 vehicles and delivered 1,404 vehicles during 2023’s second quarter. Already, I’m discerning a problem here: Lucid’s ratio of delivered to produced vehicles is between 64% and 65%. The company seems to have a much easier time making its EVs than actually selling them.
Furthermore, there hasn’t been any recent improvement in terms of EV deliveries, as Lucid Group delivered 1,406 vehicles in the first quarter.
Here’s the most painful part, though: Wall Street expected Lucid Group to deliver 1,873 vehicles in Q2. So, Lucid missed the mark by a wide margin.
Will Saudi Arabia Be Lucid Group’s Saving Grace?
In the same press release, Lucid Group disclosed that it “began material shipments to the Kingdom of Saudi Arabia.”
Some LCID stock investors might hope that the company turns out to be a huge success in that region.
Last year, Saudi Arabia’s sovereign-wealth fund, known as Public Investment Fund (PIF), added a nearly $1 billion position in LCID stock.
Then, earlier this year, PIF agreed to purchase 265,693,703 shares of Lucid common stock from the company for approximately $1.8 billion.
Thus, Saudi Arabia is heavily invested in Lucid Group. It might also be claimed that the success or failure of Lucid’s operations in Saudi Arabia could make or break the company.
Reportedly, Lucid Group has an agreement to deliver 100,000 vehicles to the Kingdom of Saudi Arabia.
This might be the only reason LCID stock hasn’t completely collapsed by now. If Lucid Group’s arrangement with Saudi Arabia breaks down or even just slows down, that could be the beginning of the end for Lucid Group.
Truly, the company needs to deliver more vehicles in the U.S. before it deserves Wall Street’s stamp of approval.
The Risk-to-Reward Isn’t Favorable
Lucid Group isn’t delivering many EVs in the U.S., its home country. There’s not enough data to know whether the company will succeed in China.
Maybe Saudi Arabia could be Lucid Group’s savior – or maybe not. One piece of unfavorable news from Saudi Arabia could send Lucid stock much lower.
Therefore, investors should prepare for LCID stock to be volatile and highly news-sensitive. Unless Lucid Group’s U.S. vehicle delivery numbers improve over the coming months, cautious stock traders should steer clear and seek EV-market returns elsewhere.
On the date of publication, David Moadel 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.
