The Latest Bad News Is More Reason to Steer Clear of Lucid Stock
Over the past week, there has been a fair bit of negative news regarding Lucid Group (NASDAQ:LCID) stock. Shares trended up late last month, some developments may change the stock’s trajectory. Including tax loss harvesting and other factors, LCID may face a potential decline in price in the coming weeks.
If that’s not bad enough, 2024 may shape up to be another painful year for Lucid investors. Issues with demand and production have of course not yet gone away. These and other issues are more than enough to place more pressure on the stock, leading to another year of horrendous price performance.
LCID Stock and the Latest Bad News
Since Dec. 8, Lucid Group has been hit with not one, but two negative developments. First, as InvestorPlace’s Dana Blakenhorn discussed earlier this week, LCID has been removed from the Nasdaq 100 index. In hindsight, it may have been hasty to have added this early-stage company so soon to a major tech index.
Given the popularity of LCID stock and its perceived chances of outperforming Tesla, it’s understandable, though.
Second, Lucid announced on Dec. 11 that CFO Sherry House, after more than two years in the role, has resigned. Admittedly, while a CFO exit is not a good look, the fact House is leaving the company to pursue “other opportunities” may not be a red flag.
Still, the market may perceive it as one. This news has so far had a mild impact on LCID’s share price performance, and could continue to do so in the near-term. Not only that, even if the market soon finishes digesting this news, more bad news may be just around the corner.
More Pain Ahead?
What exactly did I mean above, when I said that there may be more pain ahead for LCID stock investors? During 2023, shares have declined in price by just over 25%. The stock today trades at price levels well below its past high-water mark (north of $60 per share).
Following these steep declines, it may seem as if the dust has settled. From here, there’s minimal downside and ample upside. Unfortunately, this is far from the case. As discussed previously, underwhelming operating results have been the key driver of the stock’s long-term decline.
Again, this issue has yet to clear up. Confidence in the company’s execution abilities soon improving remains very low. Hence, the market’s lack of enthusiasm for Lucid’s latest bit of positive news: the unveiling of its Gravity SUV model at last month’s L.A. Auto Show.
The analyst community also continues to grow more bearish. As Stifel’s Stephen Gengaro argued recently, Lucid is “two to four years away” from significantly ramping up production volume. With such disheartening prospects, a slide back to its 52-week low ($3.62 per share), or even lower, appears very possible for LCID next year.
The Verdict
Sure, Lucid remains well-protected against a potential “game over” moment. Saudi Arabia’s Public Investment Fund (or PIF), the company’s majority owner, is likely to continue providing enough capital to keep the lights/further fund the company’s build-out.
However, for outside shareholders, this provides only cold comfort. As continued near-term headwinds keep making the stock cheaper, PIF can keep buying more newly issued shares at lower prices, enabling the sovereign wealth fund to grow its exposure to potential upside, all while watering down returns for other investors.
Lucid shares are at risk of a moderate slide in the immediate-term. Next year could bring another year of double-digit losses.
Add because the company’s primary funding method will likely negatively affect long-term returns, and it’s clear that avoiding LCID stock at all costs remains your best move.
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.
