Stock Market

Electric vehicles are likely to remain a key investment theme through 2022. However, as competition in the industry intensifies, investors need to be increasingly selective in choosing EV stocks. Lucid Group (NASDAQ:LCID) stock is one stock that deserves a place in the portfolio. The LCID stock price is up 8.83% so far in 2022.

A photo of the Lucid Motors Air EV from 2018.

Source: ggTravelDiary /

Last year was significantly volatile for LCID stock. From a euphoric rise prior to the SPAC business combination announcement to a sharp decline below $20 levels.

However, the current rally in LCID stock is non-speculative. As customer deliveries begin, the uptrend is likely to be driven by fundamental news.

It’s worth noting that the company’s Lucid Air Dream edition is fully booked. Additionally, the company has started reservations for Air Pure, Air Touring and Air Grand Touring models.

An important point to note is that Lucid is taking reservations online from 17 countries, excluding the United States. The company is pursuing an aggressive international expansion plan.

Nio (NYSE:NIO) has been in business for few years and started international expansion with Norway in 2021. Further, Nio plans to expand to 25 countries by 2025.

This puts into perspective Lucid Motors’ aggressive expansion stance.

Lucid is also likely to follow Tesla’s (NASDAQ:TSLA) approach for international expansion. Tesla has Gigafactory presence in the U.S., Europe and China.

Lucid Motors CEO Peter Rawlinson is also looking at building factories outside the U.S. This will help the company expand capacity and reduce logistics costs.

The upstart car maker is already looking at quadrupling the size of its factory in Arizona. This will help in catering to the incremental demand in 2022 and 2023.

Why Lucid is Likely to Succeed?

I believe that Lucid is likely to receive a strong response through 2022. It’s worth noting that as of November 2021, the company already had more than 13,000 reservations.

Lucid has positioned the first model as a luxury car and the market response is clearly positive. The model comes with a technological edge. As an example, Lucid Air Dream Edition is the first car certified by the EPA for a range of 520 miles.

Lucid Air was also named as MotorTrend’s car of the year for 2022. According to the auto industry bible, the car is “is a technological tour de force.”

One reason for Lucid opening reservations in multiple countries is the fact that the Lucid Air is aimed at the higher end of the market. A wider market reach is needed for deliveries growth to be robust.

However, it’s very likely that Lucid will be producing mass market cars in the next few years. This will significantly expand the company’s addressable market. The company intends to launch a rival for Tesla Model 3 by 2024 or 2025.

Additionally, Lucid is likely to partner with automakers for a $25,000 electric car in the next three to four years. Clearly, the company has ambitious plans and the EV market has multi-year tailwinds.

LCID Stock Supported by Sustained Growth

Lucid Motors is likely to have presence in all key EV markets by 2023 or 2024. With international expansion, new models and focus on technology, the company is positioned for sustained growth, which will support LCID stock momentum.

The company reported cash and equivalents of $4.8 billion for Q3 2021. In December 2021, the also raised funds in excess of $2.0 billion through convertible notes. Therefore, the company has a liquidity buffer of nearly $7.0 billion (not adjusted for Q4 2021 cash burn). This provides ample financial flexibility for aggressive growth in the next 12-18 months.

It’s worth noting that for Q3 2020, the company invested $342 million towards research and development. Investments increased by 72% in Q3 2021 to $587 million. This is a clear indication of the company’s focus on creating a differentiation through investment in technology.

Overall, LCID stock looks attractive even after a 63% rally in the last six-months. The uptrend in the stock is likely to sustain through 2022.

On the date of publication, Faisal Humayun did not hold (either directly or indirectly) any positions in any of the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

Faisal Humayun is a senior research analyst with 12 years of industry experience in the field of credit research, equity research and financial modelling. Faisal has authored over 1,500 stock specific articles with focus on the technology, energy and commodities sector.

Articles You May Like

What Causes Inflation and Who Profits From It?
Stocks head for another potentially treacherous week, as a slew of retailers report earnings
What Crash? 10 Stocks to Buy That Are Gaining Momentum
Tesla: Never Bought it and Never Will
7 Growth Stocks to Avoid Until the Market Crashes Again