Now down deep in “penny stock territory,” it’s possible that some traders are looking at Lucid Group (NASDAQ:LCID) as a fast money trading opportunity. However, a grim long-term LCID stock outlook makes even this sort of speculation a risky endeavor.
Sure, it’s not as if shares in this fledgling early-stage EV maker have been moving on a steadily downward trajectory. For instance, in the past month, the stock has zig-zagged higher and lower, primarily during a short-lived relief rally for EV stocks that occurred between Jan. 28 and Jan. 29.
But while it’s possible that relief rallies boost LCID a few times more, anticipating “dead cat bounces” is a lot easier said-than-done.
More importantly, instead of another wave of temporary excitement boosting shares, a spate of bad news could just as easily emerge again, causing the next major wave of price declines.
Why You Shouldn’t Bet on Another Lucid Stock Bounce
As you likely know, Lucid Group isn’t doing so hot. The company thus far has made little progress in becoming a major electric vehicle brand. Sure, it’s not as if the current economic environment has been all that favorable to the EV industry.
Some of Lucid’s lack of success producing and delivering luxury EVs to customers can be blamed on factors outside of its control, like high inflation and high interest rates. However, that’s not the entire story. Factors within its control, such as differentiating its product from the competition, are to blame as well.
That said, even as key issues remain, I’ll admit that another short-term bounce remains within the realm of possibility for LCID stock. For instance, bullish macro news, such as further indication that lower interest rates will come down later this year, could give the shares a boost similar to that of the boost experienced late last month.
With expectations set very low ahead of Lucid’s upcoming earnings release (scheduled to happen post- market on Feb. 21), it’s also possible shares rally on a “less bad than feared” earnings report. Then again, maybe not. Next week’s earnings release could mark the start of Lucid’s continued downfall.
Still Poised to Hit New Lows
Admittedly, some aspects to the aforementioned Lucid Group earnings release will come as little surprise to investors. Based on delivery figures for Q4 2023 (1,734 vehicles, down year-over-year), the market has a general idea as to where revenue will come in at for the quarter.
However, other aspects of the release could be surprising. The company is launching a new model (the Gravity, an electric SUV) later this year. With this, investors may expect Lucid’s management to provide stronger production/deliveries guidance for 2024.
If production guidance comes in below expectations, the resultant disappointment may weigh on shares post-earnings.
Lucid may have reported narrower-than-expected losses last quarter, but recent cost-cutting efforts like layoffs may cannot make much of an impact on reducing losses and cash burn. This too could elicit a negative reaction by the market and underscore a top reason why the long-term LCID stock outlook remains very bleak.
I’m talking about the high likelihood that Lucid continues to depend on capital infusions from its majority owner, Saudi Arabia’s Public Investment Fund. As I have argued previously, these dilutive capital infusions are the main reason why LCID is still poised to hit new lows.
Bottom Line: As Grim LCID Stock Outlook Persists, Stay Away
LCID may be zig-zagging higher and lower for now, yet this may prove fleeting. After earnings, shares could experience yet another steady slide in price.
Poor fiscal results, renewed dilution concerns, and a continued lack of bullishness for EV stocks by the market could send this stock sinking back towards its 52-week low ($2.54 per share).
Over a longer time frame, the bear case for Lucid Group is pretty cut-and-dry. High competition, and the slowdown in EV adoption point to the company continuing to report lackluster sales and high cash burn.
Further Saudi investment could keep it from going under, but the resultant dilution will keep shares spiraling to lower-and-lower prices, barring sudden success scaling up/reaching profitability.
As a grim LCID stock outlook persists, there’s still only one wise course of action: stay away.
LCID stock earns an F rating in Portfolio Grader.
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.