Not long ago, we warned investors about the problems facing electric vehicle manufacturer Lucid Group (NASDAQ:LCID). Even if LCID stock catches a bid now and then, we’re still assigning it a “D” grade and a cautious outlook.
Interestingly, Norway-based financial institution DNB Asset Management doubled its share position in Lucid Group. Does this mean you should go all-in on Lucid Group, though?
Not necessarily, as the automaker’s troubles haven’t suddenly evaporated. After conducting your due diligence, you’ll likely agree that Lucid Group’s meager EV sales don’t justify a share purchase now, be it large or small.
LCID Stock Is Sentiment-Driven
Here’s an example of how short-term sentiment can drive share prices. On July 28, LCID stock surged 8.42% to $7.47 even though there was no company-specific news on that day.
Nothing special had happened in the EV market. Financial traders were just in a risk-on mood that day because an inflation gauge came in lower than expected.
This doesn’t mean that Lucid Group is suddenly a highly successful EV seller. It’s just a symptom of some financial traders’ short attention spans. Apparently, they’ve already forgotten about (or are willing to ignore) Lucid Group’s failure to achieve profitability.
Yet, when the prevailing short-term sentiment is decidedly risk-on, price distortions can happen. It was only a few weeks ago when Bank of America analysts set an $8 price target on LCID stock.
Now, it’s entirely possible that the stock will surpass that price target. This could happen even though the demand for Lucid Group’s Air sedan model is, to borrow a quote from Bank of America analyst John Murphy, “tepid.”
Lucid Group: Prepare for a Potential Letdown
When a stock price jumps without sufficient justification, that’s a setup for disappointment. And, with Lucid Group about to release its second-quarter 2023 earnings data on Aug. 7, LCID stock could drop as fast as it ascended.
Remember, Lucid Group already released some of its operational data for the second quarter. Specifically, the automaker delivered 1,404 vehicles during the quarter, even though Lucid had produced 2,173 vehicles.
Thus, Lucid’s quarterly ratio of delivered to produced vehicles was only 64% to 65%. Analysts had called for Lucid Group to deliver around 2,000 vehicles in Q2. So, why should anyone expect the company to announce expectation-beating financial results on Aug. 7?
And by the way, whatever happened to Lucid Group’s ambitious planned venture into China’s EV market? Again, some financial traders with short attention spans might have forgotten about that.
We haven’t forgotten, though, and Lucid Group really should provide consistent updates on its activities in China (if there are any).
Don’t Press Your Luck With LCID Stock
If you invested in Lucid Group and got a break with a random share-price pop, consider yourself lucky. And, consider taking profits before the opportunity is gone.
The point here isn’t to disrespect Lucid Group and its shareholders. Just be aware that share-price bumps don’t always reflect a company’s true long-term value.
All in all, LCID stock still gets a “D” grade and investors might want to divest their holdings prior to the Aug. 7 earnings announcement.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.