Lucid Motors (NASDAQ:LCID) stock has some very impressive strengths, including the resume of its CEO and the positive reviews and unmatched range of its Lucid Air electric vehicle.
These advantages, along with a large amount of press coverage, explain the current, gigantic valuation of LCID stock.
That huge valuation, along with the relatively unimpressive order totals announced by the company, are two of the automaker’s main weaknesses. A new issue for Lucid is that the shares appear to have lost a significant amount of momentum.
Here is the complete list of four important strengths and four critical weaknesses of LCID stock. At the end of the article, I’ll provide my own view of the shares’ short-term and long-term outlook.
Lucid’s 4 Important Strengths
CEO Peter Rawlinson has a very impressive resume. What’s more, his resume includes a key role at the automaker that many view as the gold standard of EVs. Of course, I’m referring to Tesla (NASDAQ:TSLA), where Rawlinson was vice president of vehicle engineering and chief engineer of the Model S.
Two other advantages for the automaker are the Lucid Air’s unparalleled range of 520 miles on a single charge, and its price advantage versus Tesla’s comparable Model S EV. The base version of the Air costs $77,400, while the long-range version of the Model S sets buyers back $88,740. Neither price includes the $7,500 federal tax credit.
Finally, the Air has received seemingly almost exclusively positive, even euphoric, reviews. For example, MotorTrend called it “an impressive rethink” of luxury sedans. Car and Driver labeled the Air’s Dream Edition “brilliance out of nowhere.”
On the other hand, Car and Driver did somewhat temper its enthusiasm by only ranking the Air fifth in its category. Still, my research indicates that the reviews of the Air were generally overwhelmingly positive.
Lucid’s 4 Critical Weaknesses
Lucid is facing a tremendous amount of competition from both traditional automakers entering the EV race and EV startups. Let’s just consider the four EVs rated ahead of the Lucid Air by Car and Driver. That list includes Tesla’s Model S, two Porsche (OTCMKTS:POAHY) EVs, and Rivian’s (NASDAQ:RIVN) R1T. Just behind the Lucid Air, in sixth place, is the Audi (OTCMKTS:AUDVF) eTron GT.
Tesla’s brand, of course has become extremely strong, while Porsche also has one of the best brands among automakers in the world.
Rivian just received a ton of publicity and money as a result of its IPO, and it’s backed by one of the world’s largest and most powerful companies, Amazon (NASDAQ:AMZN). Finally, Audi has a formidable brand itself, and it’s owned by one of the world’s largest automakers, Volkswagen (OTCMKTS:VLKAF). The German automaker had over $40 billion of cash as of the end of last quarter, so its advertising budget is probably gargantuan.
Second, as I mentioned earlier, the valuation of LCID stock is quite elevated. Specifically, the pre-revenue automaker has a market capitalization of over $65 billion.
Yet (third), unlike Rivian and Arrival, two other pre-revenue EV makers with high valuations, Lucid hasn’t announced orders totaling many tens of thousands of vehicles. As of Sept. 28, the automaker only had 13,000 pre-orders.
And finally, LCID stock appears to have lost some of the momentum that it’s had for much of this year. In fact, since recently peaking around $47.50 on Nov. 8, the shares have tumbled nearly 20%.
The Bottom Line on LCID Stock
Lucid has impressive strengths that could enable it to climb over the longer term. But given the company’s critical weaknesses, the shares pose a great deal of risk.
What’s more, since they have lost momentum recently, while the company is slated to report its third-quarter results on Nov. 15, they also are quite risky in the short term.
As a result of these issues, I urge investors to sell the shares at this point.
On the date of publication, Larry Ramer held long positions in RIVN and ARVL. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Larry Ramer has conducted research and written articles on U.S. stocks for 14 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been GE, solar stocks, and Snap. You can reach him on StockTwits at @larryramer.