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Avoid Lucid Group Stock Until Management Provides Post-Earnings Answers

Lucid Group, Inc. (NASDAQ:LCID) stock has made lots of headlines since going public in the summer of 2021. Many of them havn’t been great. Until you can be sure LCID management knows what it is doing, there’s probably no need to t…

Lucid Group, Inc. (NASDAQ:LCID) stock has made lots of headlines since going public in the summer of 2021. Many of them havn’t been great. Until you can be sure LCID management knows what it is doing, there’s probably no need to through money at LCID Stock.

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LCID has losses of nearly 25% in 2022 and nearly 50% in the past three months.

My previous articles on Lucid have argued the stock remains highly expensive.

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For one thing, the average cost is expected to increase as production ramps up. Add to that the subpoena by the SEC about the SPAC deal that took it public, and people are right to be wary.

There are also reports that Lucid may have chosen the wrong place to expand. It seems as if they need more people than the area has homes.

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It’s as if Lucid didn’t make a comprehensive feasibility study about risks, potential, and limitations. You cannot expect to hire a workforce that will need to work a full shift and endure a two-hour commute each way. The incentives they may have to offer could put immense pressure on the operating expenses of Lucid Group.

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Ask almost any EV maker about expansion plans and they’ll likely tell you they have lots. The future of mobility tends to be electrification, better range and advanced technology.

Lucid Group will report its fourth quarter and fiscal year 2021 financial results on Feb. 28. The form will allow retail and institutional shareholders to submit and upvote questions. Selected questions will be answered by Lucid management during the earnings call.

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A Closer Look at LCID Stock

It will be important for the management to deliver an update on its model, priorities at the core of the vision of the company. It would also be nice to hear some plausible explanation about the stock price selloff.

With $4.8 billion in cash as of Nov. 2021, it will be important to know how the management will use the cash.

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Lucid has emphasized the safety features of its Air model. In the past, Lucid Motors claimed the Air beats the Tesla (NASDAQ:TSLA) Model S in range, autonomy and other luxuries. It makes the same claims about its superiority to other high-end EVs.

Scrutiny on research and development costs to support the state-of-the-art Lucid Air safety features will shed light on capital expenditures. A rise in operating expenses will make the path to profitability both bumpier and lengthier.

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I am also keen to know more about Project Gravity. Lucid will launch a luxury SUV under that name and the progress of its launch will provide insight.

I have concerns that Lucid is entering this SUV market too late, though. There is too much competition already from European luxury car makers and U.S car manufacturers are also not left behind.

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Scalability plans and investments in future battery technology will be very important too.

The Bottom Line

The supply chain problems and global chip shortage are on top of the list of the risks Lucid should address. It is too early yet but any recall problems in the future could harm the brand name of the company.

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The upcoming earnings will be a catalyst for LCID stock. Until then it is better to stay on the sidelines as volatility will increase and price swings can fool you. The smart money will wait to scrutinize the real financial numbers after their release in late Feb. 2022.

On the date of publication, Stavros Georgiadis, CFA  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.

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Stavros Georgiadis is a CFA charter holder, an Equity Research Analyst, and an Economist. He focuses on U.S. stocks and has his own stock market blog at thestockmarketontheinternet.com/. He has written in the past various articles for other publications and can be reached on Twitter and on LinkedIn.

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