You Can Afford to Be Patient Before Buying Lucid Stock

Stock Market

If you’re a Lucid Group (NASDAQ:LCID) shareholder, you’re probably feeling pretty good today about LCID stock. And if you’re one of those sitting in the C-suite, you’re breathing a sigh of relief.

The Lucid Motors (LCID) Plant in Arizona.

Source: Around the World Photos / Shutterstock.com

Wall Street was keeping a close eye on Jan. 19. That date marked 180 days from the successful blank-check merger with Lucid’s special purpose acquisition company (SPAC) partner, Churchill Capital Corp IV.

Shares had fallen 14% in the week before the lockup expiration date for legacy shareholders and there was some concern that LCID stock could take a tumble as shareholders took profits and trimmed their positions. After all, the first private investment as public equity (PIPE) lockup expiration for LCID occurred on Sept. 1. In the week preceding that event, LCID stock fell 8.6%. Then it fell another 11% on the day.

It was only reasonable to fear that we’d see another drop on Jan. 19. However, thankfully for LCID stock, that didn’t happen.

LCID Stock and the Expiration

Lucid didn’t see a drop on Jan. 19. In fact, LCID stock actually rose on the day of the lockup expiration. And on the subsequent day of trading, Lucid fell by only 3.3%. That’s not bad at all.

Shares are still about 50% over their public debut, but that’s to be expected as LCID stock was caught up in the broader selloff of tech stocks and electric vehicle (EV) companies. When the reverse merger closed, legacy shareholders were holding about 1.19 billion shares, according to a filing submitted to the U.S. Securities and Exchange Commission (SEC). The Saudi Public Investment Fund holds a 62.7% stake in LCID stock.

And it has good reason to hold those shares, according to Wccftech:

“The Saudi PIF […] is a long-term investor and is unlikely to be motivated by short-term moves in Lucid Group shares. Secondly, Lucid Group currently forms a cornerstone of Saudi Arabia’s grand transformation strategy. While the Saudis have been negotiating with a number of automakers to establish manufacturing units at a dedicated hub on the Kingdom’s west coast, only Lucid Group is currently at an advanced stage of doing so.”

Lucid at a Glance

Lucid Group is headed by CEO Peter Rawlinson, who was best known before Lucid as the vehicle engineer for the Tesla (NASDAQ:TSLA) Model S.

The Lucid Air sedan didn’t even come out until Oct. 30, but it has already been named the 2022 Car of the Year by MotorTrend. As of Nov. 15, Lucid said it has already received 17,000 reservations for the high-end EV.

This year, the company plans to produce 20,000 vehicles at its plant in Arizona. The factory has a top capacity of 34,000 vehicles, but an expansion project should allow workers to build 90,000 vehicles per year by the end of 2023. Lucid also has plans to open plants in China and the Middle East.

In the company’s third quarter, Lucid posted a loss of 42 cents per share versus analysts’ expectations of a loss of 25 cents per share. But LCID stock also jumped more than 24% on the day. Investors were impressed with the company’s growth projections.

The Bottom Line on LCID Stock

A few days ago, I suggested that $35 was a good spot to buy Lucid if it dipped following the lockup expiration. I still think that’s good advice. However, it now looks like the end of the lockup period won’t be the catalyst that we need to buy LCID stock at bargain prices.

That’s OK. There should be other opportunities.

Remember, Lucid is going head to head with Tesla, which is a trillion-dollar company and the king of the hill when it comes to EV stocks. Redburn analyst Charles Coldicott notes that, while Lucid is a riskier investment than fellow EV startup Rivian (NASDAQ:RIVN), that’s because it’s seen as more directly competing against Elon Musk’s juggernaut. The analyst set a price target of $39 for LCID stock.

Lucid Group will continue to see some volatility in the weeks and months to come, as would any startup. I’m still going to be watching the $35 price point before I consider making a move.

On the date of publication, Patrick Sanders held a long position in TSLA stock. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Patrick Sanders is a freelance writer and editor in Maryland, and from 2015 to 2019 was head of the investment advice section at U.S. News & World Report. Follow him on Twitter at @1patricksanders. As of this writing, he did not hold a position in any of the aforementioned securities.

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