Lucid Group (NASDAQ:LCID) stock is trading more than 30% lower than its 52-week high price of $64.86. The up-and-coming electric vehicle (EV) stock is still trading at a premium, though, it is more reasonably valued now. Moreover, as it looks to ramp-up production this year, LCID stock could be back with a bang in no time.
The company has developed an incredible reputation as a luxury EV manufacturer. It is positioning itself as a major player down the line with a differentiated product line. Moreover, Lucid has $4.8 billion in its books to boost its production line.
Despite Lucid’s incredible pre-order performance and solid prospects ahead, it is valued at a fraction of Tesla’s market capitalization. Hence, LCID stock continues to be a fascinating EV play at this time.
Taking Things Up A Notch
Lucid has shown incredible engineering prowess to become a leading luxury EV maker. Its Air Dream recently won the 2022 MotorTrend Car of the Year award. Moreover, it has huge advantages over Tesla (NASDAQ:TSLA) in terms of horsepower and range, making it a compelling competitor. Becoming a “range king” is a testament to its management’s solid execution and robust ability to innovate.
Deliveries of the company’s first car, the Lucid Air, began last year. The Lucid Air is expected to ramp-up its deliveries this year. As of November, the company had over 17,000 reservations, with a 30% improvement from September. It could potentially add another few thousand reservations from November until the fourth-quarter earnings are released in February.
Furthermore, Lucid is looking to grow its production capacity in Arizona to embark on the second phase of its expansion project. Once the second phase is complete, the company could produce up to 90,000 vehicles. It could potentially deliver 20,000 EVs this year, which could grow to 34,000 by 2023.
Risks with LCID Stock
With all the positives adding up for Lucid, a few risks need to be considered. Firstly, the company recently received a query from the U.S. Securities and Exchange Commission (SEC) requesting information regarding its special purpose acquisition company (SPAC) merger. The development led to a sell-off, and given how scandals have annihilated EV companies of late, it wasn’t surprising. EV companies have a tendency to exaggerate their capabilities. Nevertheless, the development could impact LCID stock this year, as well.
Lucid’s valuation is also a cause for concern. It is trading over 15 times higher than its book value. The valuation is significantly higher than its deliveries, but Lucid could deliver an incredible 34,000 EVs annually in a couple of years. Hence, it will eventually grow into its valuation as it ramps-up deliveries over the next couple of years.
Lucid’s 2022 performance could be a litmus test for the future. It will ramp-up production of several Lucid Air models this year and the market will be looking to gauge their performance by keenly following the proceedings. Production delays and other related issues could significantly weigh down LCID stock. Moreover, scaling production while maintaining its financial flexibility will be a massive challenge, as well.
Bottom Line on LCID Stock
Lucid will be under the scanner as it looks toward the mass production of its vehicles. It is likely to be a critical year for its long-term success and its ability to attract long-term investors.
However, all evidence points to Lucid’s success as it looks to become a juggernaut in the luxury EV space. It will be imperative for the company to execute well; otherwise, things could get rough for its stock. Nevertheless, after the recent sell-off, LCID stock looks highly attractive at this point.
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines
Muslim Farooque is a keen investor and an optimist at heart. A life-long gamer and tech enthusiast, he has a particular affinity for analyzing technology stocks. Muslim holds a bachelor’s of science degree in applied accounting from Oxford Brookes University.