After weeks of extended losses, electric vehicle manufacturer Lucid Motors (NASDAQ: LCID) is striving to stabilize its valuation above $2.
The equity, currently valued at $2.14, ended the last trading session up 6.47%. However, on the weekly chart, LCID is down almost 8%.
Ahead of trading on November 19, the stock is signaling an inability to sustain the previous session’s momentum, down 0.47% in the pre-market.
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LCID share price needs to target the $3 resistance level to alleviate concerns that Lucid could potentially become a penny stock amid a worrying technical set up.
The latest LCID stock upside comes against the backdrop of the incoming Donald Trump administration signaling plans to scrap the $7,500 EV tax credit implemented under President Joe Biden.
While such a move could heavily impact struggling EV manufacturers like Lucid, the company’s leadership has demonstrated confidence in navigating such an environment. Lucid CEO Peter Rawlinson has pointed out that the firm is ‘mostly immune’ to these changes.
Additionally, with markets anticipating further growth for Tesla (NASDAQ: TSLA) due to CEO Elon Musk’s ties with Trump, Rawlinson has asserted that Lucid will feel less impact, claiming his company has ‘taken the mantle of technology leadership’ from the Texas-based automaker.
Is LCID worth investing in?
Investors should remain cautious of Lucid’s recent struggles when considering an investment. These challenges have included a significant stock price plunge to historical lows, delivery delays due to supply chain issues, vehicle recalls, and price cuts aimed at gaining market share dominated by Tesla.
Despite these hurdles, Lucid offers room for bullish investors. The leadership has expressed confidence in its strategy.
For example, investors can find assurance in Rawlinson’s belief that Lucid will remain resilient, having dismissed the idea of producing low-cost EVs, emphasizing the firm’s focus on innovation.
To this end, Rawlinson has compared Lucid to luxury automaker Porsche, one of the most profitable brands, highlighting its premium market positioning.
Although the EV maker has cut its delivery targets for 2024, the number of vehicles sold has been growing, boosting confidence. At the same time, new models like the Gravity SUV and strong backing from Saudi Arabia remain fundamental elements likely to drive the stock’s growth.
With 9,000 vehicles projected for 2024, analysts expect revenue to grow by 28% this year and 152% in 2025, driven by expanding SUV sales.
If plans to scale up its business prove successful, Lucid’s revenue might rise to $3.6 billion by 2026, aligning with Tesla’s annual revenue of $3.2 billion in 2014.
Lucid’s downside risks
On the downside, Lucid faces significant challenges, including price cuts, mounting losses, and its heavy reliance on Saudi backing. This reliance poses risks, especially as capital outflows by major investors such as BlackRock (NYSE: BLK) have already been observed.
“In the preceding quarter, BlackRock owned 45,228,798 LCID shares — per the latest report, the asset manager now holds 43,056,832 Lucid stocks. This represents a 4.8% reduction — which, while significant, is far from a total divestment.”
– Finbold
In summary, while Lucid has demonstrated potential for long-term growth, its short-term outlook remains uncertain, with steep losses projected through 2026. Investors must weigh the company’s innovative focus and market positioning against its financial vulnerabilities.
Featured image via Shutterstock
