Stock Market

If you’ve been waiting to buy Lucid Group (NASDAQ:LCID) on the cheap, this may be your chance. LCID stock currently sits 32% below its high of $57.75, made in mid-November. Shares have fallen nearly 14% in the past week alone as the company approaches the lockup expiration for legacy shareholders.

A photo of the Lucid Motors Air EV from 2018.

Source: ggTravelDiary / Shutterstock.com

Following the completion of its successful blank-check merger in late July with special purpose acquisition company Churchill Capital Corp IV, LCID stock shot up as much as 129%. This isn’t all that surprising when you consider what a hot commodity electric vehicle stocks were at the time.

Today, shares sit about 55% above their public debut, having been caught up in a broader sell-off in the sector and in anticipation of some volatile trading around the end of the lockup period. If LCID stock falls to $35 or lower in the coming days, it may be time to pounce.

What Does the Lockup Expiration Mean for LCID Stock?

The lockup period for existing Lucid shareholders expires on Jan. 19, which marks 180 days from the closing of the SPAC merger with Churchill. That means those shareholders are free to dump their stock or trim their positions.

When the reverse merger closed, there were 1.19 billion shares of LCID stock held by legacy shareholders, according to a filing submitted to the Securities and Exchange Commission. The largest shareholder, by far, is the Saudi Public Investment Fund. It holds a 67.2% stake in Lucid.

If we see a huge amount of shares hit the market tomorrow, it’s a good indication that legacy shareholders think LCID stock is a little overvalued right now.

The first private investment as public equity (PIPE) lockup expiration for LCID stock occurred on Sept. 1. In the week preceding the event, LCID stock fell 8.5%. It fell another 11% on Sept. 1. Three months later, though, the share price had more than doubled.

Lucid at a Glance

Lucid CEO Peter Rawlinson was best known (before his Lucid days) as the vehicle engineer for the Tesla (NASDAQ:TSLA) Model S. Tesla, which delivered more than 900,000 vehicles in 2021, now has a market cap of more than $1 trillion. It’s no wonder Lucid devotees dream of similar success for the EV startup.

Compared to Tesla, Lucid is a baby. The first vehicle deliveries of the Lucid Air sedan were made on Oct. 30. However, the vehicle was named the MotorTrend 2022 Car of the Year and the company said it had more than 17000 reservations as of Nov. 15.

Lucid plans to produce 20,000 vehicles this year at its plant in Arizona. Currently, the factory has a top capacity of 34,000 vehicles, according to Lucid. But an expansion project that’s already underway should allow the company to produce 90,000 vehicles a year by the end of 2023. What’s more, management has plans to open plants in China and the Middle East.

Lucid’s Nov. 15 earnings report was its first as a publicly traded company. Lucid reported a Q3 loss of 42 cents per share versus analysts’ expectations of a loss of 25 cents per share. But LCID stock jumped 24% on the day because investors were impressed with the company’s growth projections.

The Bottom Line on LCID Stock

Undoubtedly, Tesla is the big brother in this relationship. Elon Musk’s company will be a formidable competitor.

That’s one reason why Redburn analyst Charles Coldicott initiated coverage of LCID stock with a price target of $39 and a “neutral” rating.  He says Lucid should win a “fairly moderate” market share in the U.S., but warns it will have more difficulties in the global market where China has a greater advantage.

Personally, I think the $39 price target is low. If we see LCID stock dip to $35 or below after the lockup period ends tomorrow, it could present an excellent entry point.

On the date of publication, Patrick Sanders was long 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.

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