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Lucid Stock Pops on News of Big Saudi Deal, Should You Buy Shares?

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  • After a steep drop on Tuesday, Lucid (LCID) stock popped on Wednesday after news broke of a deal to sell electric vehicles to the Saudi government.
  • Wednesday’s gain by LCID stock wasn’t enough to make up for Tuesday’s drop, leaving LCID down 54% in 2022.
  • With LCID stock still in record low territory, this is an opportunity for investors to buy shares in an EV company that could be on the cusp of big things.

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Lucid (NASDAQ:LCID) has felt the full effect of the 2022 market pullback for growth stocks. There have been a few bright spots, like the announcement of the Lucid Air Grand Turing Performance, a $179,000 luxury performance EV with a 446 mile range. LCID stock popped ever so slightly the day after that news broke.

However, the story so far in 2022 has largely been a dismal one for Lucid investors. LCID stock soared last fall as the Lucid Air went into production and began winning awards. In just three weeks starting October 22, 2021, shares more than doubled in value. They peaked at $55.52 on November 16, 2021. In contrast, 2022 has seen LCID stock in an extended slump. On Tuesday, Lucid was among a group of EV stocks that took a hit. LCID closed at $17.64, a 9% drop and an all-time low for the company’s shares.

Wednesday was an altogether different story. News broke that the government of Saudi Arabia has placed an order for up to 100,000 Lucid EVs over the next decade. That’s a big deal for an EV startup that is just beginning production. The market reacted to the Saudi deal by sending LCID up 2.4%. The question is, with shares still near all-time lows, should you buy LCID stock?

Ticker Company Current Price
LCID Lucid $18.74

Lucid Is Finished With the Hardest Part

Lucid has successfully passed the toughest part of being an EV startup. The company has gone beyond concept vehicles and mockups — the easy part — to opening a factory and beginning commercial production. As of the end of February, Lucid had produced over 400 EVs, with 300 of those already in customer hands. In addition, the company announced a planned 2.85 million square foot expansion of its Arizona manufacturing facility was on track. Lucid also announced it was planning to open a new manufacturing plant in Saudi Arabia. That last part is important.

The Lucid Air is the company’s first EV, and it has been a runaway success. It launched to rave reviews and won Motor Trend’s prestigious 2022 Car of the Year Award. The company has reservations for over 25,000 of them, representing some $2.4 billion in sales.

The Saudi order is a big win. The oil-rich nation is on a mission to adopt sustainable technology, and that means EVs. The agreement will see the Saudi government purchase 50,000 Lucid EVs over the 10 year period, with the option to purchase another 50,000. Volume will initially be 1,000 to 2,000 vehicles annually starting no later than Q2 2023, and ramping up from there. Remember that commitment to build a factory in Saudi Arabia? That makes sense now. In addition, CNBC reports that Saudi Arabia’s Public Wealth Fund holds roughly 62% of LCID stock.

Supply Chain Challenges and Economic Concerns

The case for buying Lucid stock looks pretty good with the Lucid Air in production, winning awards, piling up orders and now the subject of a massive Saudi government purchase. 

However, there are reasons why LCID stock is down so dramatically in 2022. 

Economic challenges like inflation and rising interest rates are spooking the market. Lucid customers may be well-heeled (the cheapest model starts at $69,900), but even they may cut down on splurges like a luxury EV if the situation worsens.

More problematic in the immediate term are ongoing supply chain issues. The company had initially been targeting production of 20,000 vehicles this year. In February, it announced that target has been slashed to between 12,000 and 14,000 because of “extraordinary supply chain and logistics challenges.” The company has reported challenges in obtaining everything from computer chips to glass for windows and carpet for car interiors.

Reduced production targets and those ongoing supply chain problems have been a big part of the LCID stock story in 2022.

Should You Buy LCID Stock Now? 

Lucid is a “B” rated stock in Portfolio Grader. As an EV startup with a massive addressable market and vehicles in production, it offers real potential for long-term growth. That big Saudi order is another sign that Lucid is no fly-by-night.

The real issue about buying Lucid stock right now is the prospect of continued downside from supply chain issues and economic volatility. I’d say the price is right for snapping up shares on the cheap for a long-term growth portfolio. But if the prospect of further drops in 2022 make you nervous, you might want to hold off until the company reports its second quarter earnings on May 5. The company will likely provide an update on production and production targets at that point, giving a better idea of whether the stock is due for a rally or further hurt.

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.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.