Is electric vehicle manufacturer Lucid Group (NASDAQ:LCID) turning a corner in 2023? Don’t make any assumptions, as LCID stock may have rallied on rumors rather than verified facts. Besides, Lucid’s primary problems, such as meager vehicle production amid heated competition, haven’t disappeared.
Frankly, it’s just not a great time to try to sell expensive EVs to the public. Elevated inflation and recession fears have caused some people to delay new vehicle purchases.
That’s a problem for Lucid Group, which sells high-priced EVs. Nevertheless, there’s a public investment fund that still seems very bullish on Lucid, but this doesn’t mean you need to jump into the trade right now.
Why Did LCID Stock Rally 98%?
In a shocking price move, LCID stock spiked 98% to $17.81 on Jan. 27 before pulling back. Bear in mind, this was a $6 stock in early January.
The price action was so volatile that the New York Stock Exchange halted trading 12 times on Lucid Group shares in a single day. So, what was all the excitement about?
Apparently, speculation circulated that Saudi Arabia’s Public Investment Fund (PIF), which already owns 65% of Lucid Group, will purchase the automaker’s remaining shares.
It hasn’t been confirmed, however, that the PIF will actually buy the remaining Lucid shares. Cautious investors should wonder whether this possible but unconfirmed event has already been priced into LCID stock. Indeed, there may be a “buy the rumor, sell the news” outcome to this story.
Lucid Group’s Problems Haven’t Disappeared
Interest from Saudi Arabia’s PIF doesn’t mean that Lucid Group is suddenly problem-free. Remember, Lucid is facing competition from automotive giants that are also selling EVs, and Lucid Group only delivered 4,369 vehicles in all of 2022.
So, it’s not as if Lucid Group’s vehicles have been selling like hotcakes. Lucid Group’s EVs are quite expensive, even after $7,500 tax credits under the Inflation Reduction Act have been factored in.
It’s been said that the cheapest vehicle from Lucid Group costs $87,000, while most of the automaker’s EVs are priced “well north of” $100,000. Furthermore, reportedly Morgan Stanley analysts said Lucid Group is “impacted by what they call the Hunger Games pricing war.”
Lucid Group can implement price cuts, but this won’t necessarily make the company competitive or profitable. Lucid Group has been unprofitable for a long time, and until that changes, it’s difficult to recommend LCID stock with confidence.
What You Can Do Now
Speculative frenzy, while exciting in the moment, can lead to a disappointing outcome. Thus, even if Saudi Arabia’s PIF buys the remainder of Lucid Group, this event seems to have already been priced into Lucid shares.
Moreover, Lucid Group’s EVs are expensive and the company isn’t profitable. Therefore, for the time being, it’s wise to remain on the sidelines and avoid LCID stock.
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.