There’s Too Little Charge to Power a Squeeze for Lucid Stock
With Lucid Group (NASDAQ:LCID) shares slumping back to their 52-week low, plenty are curious whether LCID stock could soon make a comeback.
This is due largely to LCID’s high short interest. In the eyes of risk-hungry traders, this factor points to an increased potential for a “short squeeze,” or a big run-up in shares caused by short-sellers closing out positions.
In theory, there are two ways in which a short-squeeze could happen. The first way has to do with speculative frenzy. The second way is more connected to the electric vehicle maker’s fundamentals.
However, looking at each one, there’s a clear takeaway. While possible that a squeeze may occur with this stock, whether it is possible is another question entirely. With this, let’s take a closer look, and see why it’s best to put any squeeze hopes you may have to rest.
LCID Stock and its Perceived ‘Squeeze Appeal’
According to Fintel, 22.3% of Lucid Group’s outstanding float has been sold short. This represents a relatively high level of short interest.
The stock is perceived to have high “squeeze appeal,” or a high chance of experiencing a short-squeeze.
Perceptions notwithstanding though, I am doubtful that a short squeeze for LCID stock is right around the corner. This is my view, whether we are talking about a purely speculative squeeze, or one driven primarily by changes in fundamentals/new developments.
Sure, while not as common as they were during 2021 and 2022, speculative squeeze-driven rallies, or those that occur on zero news, continue to take shape.
However, most of these squeezes are happening with smaller, more distressed stocks. While Lucid has its own set of issues, with its large size and cash position (around $5.25 billion), it definitely does not fit into this category.
Regarding the chances for a fundamentals-driven squeeze rally, I’ll admit that it is far less certain that such an event does not take place. Small bits of positive news have lifted the stock higher before.
Still, it is very questionable that another one is just around the corner for Lucid. Here’s why.
Poised to Stay Stuck in the Mud
Looking at recent developments, it’s doubtful that this company will soon report the sort of improved results that will cause a fundamentals-driven squeeze rally for LCID stock.
Earlier this month, Lucid released its results for the quarter ending June 30, 2023. For the period, the company reported $150.9 million in revenue, and net losses of 42 cents per share.
On both metrics, the company fell short of sell-side expectations. Some positive updates outweighed these poor results, such as Lucid stating it intends to build 10,000 vehicles this year, and that it now has a cash runway through 2025.
But while these updates are clearly not negative, neither one suggests better results in the coming quarter. As I noted in my last LCID article, the EV maker continues to deal with demand challenges. So far, the brand has failed to build up much of a following.
Other efforts, like aggressively reducing vehicle prices, have had little of an effect, either. Lucid may still try to convince investors its just around the corner from reverse-engineering Tesla’s (NASDAQ:TSLA) success, yet I would count on it staying stuck in the mud.
Bottom Line
Still not convinced that Lucid’s demand problems are likely to continue? Consider the latest “grasping at straws” statements from the company’s management.
On the latest earnings conference call, CEO Peter Rawlinson talked about getting more of the fledgling EV maker’s vehicles into the hands of buyers, and onto the road. Rawlinson believes this will cause increased demand.
That is fine, but it’s a bit of a Catch 22, isn’t it? While selling more vehicles could have a snowball effect on demand, how does Lucid intend to get the ball rolling?
Until that question gets answered, just like I wouldn’t count on speculative frenzy alone drive a squeeze, don’t count on improved results either to do so for LCID stock. Resist the urge to buy on “squeeze appeal,” and stay away instead.
LCID stock earns a D rating in Portfolio Grader.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
