Despite Scaled Back 2022 Estimates, Buy Lucid Stock for the Long Term

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  • Early investors in Lucid Motors (LCID) stock are feeling the pain from buying a SPAC stock.
  • Like a promising draft pick, Lucid Motors needs to develop the team behind it.
  • LCID stock won’t deliver its big payoff for several years, but could be worth accumulating now.

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Ever since the flight to safety began in November, shares of Lucid Motors (NASDAQ:LCID) have been in decline. One reason for this is that LCID stock went public via a special purpose acquisition company (SPAC). SPAC stocks were extremely popular in late 2020 and early 2021, but fell out of favor when investors began to realize that the payoff for many of these stocks was years away.

However, it’s a little unusual that LCID stock is experiencing such a decline after launching production on its first electric vehicle (EV) in October. Or is it? In the EV sector, Lucid Motors looks like it has long-term potential. But before the company can realize that promise it has some building to do. And that may act as a headwind on the stock in the short term.

It’s Time to Build the Team

When I wrote about LCID stock the first time after it started to trade publicly, I compared the hype surrounding the company to a “can’t miss” pick by professional sports teams. Lucid was, and is, a company and brand with loads of potential.

But as many promising draft picks quickly discover, the team around them is a work in progress. In this case, Lucid offers some of the brightest minds in the EV space, a partnership with the Saudi Arabian government, and a growing portfolio of niche electric vehicles (EVs). These luxury vehicles cater to a customer base who will not be as affected by whatever happens in the economy in the next couple of years.

The problem is that some “can’t miss” draft picks do miss. I’m not suggesting that will happen with Lucid Motors. But the landscape for the company hasn’t gotten any easier. And investors who are still holding shares of LCID stock they purchased when it was trading for over $50 a share in mid-November are sitting on a 67% loss.

The bad news is that those investors will likely have to hold on for some time before the share price recovers to that level. But the good news is that if you haven’t already taken a position in LCID stock, the stock looks very attractive.

Production Hits a Snag

The most immediate concern is that Lucid is revising its production targets lower. In February, the company announced it would deliver 13,000 vehicles in 2022. That’s in the midpoint of the analysts’ guidance. However, it’s decidedly lower than the company’s initial forecast for 20,000 vehicles.

The reason given was supply chain difficulties. That’s completely believable. But it’s also drawn the attention of some lawyers and a class-action suit has been filed against the company. The primary grievance is that the company’s production estimates are far below what Lucid guided for during its initial public offering (IPO) process.

And as Will Ashworth laid out, this is leading the plaintiffs to suggest that, rather than making a good faith estimate during the IPO process, Lucid management was overpromising. I can sympathize with that point of view. But I don’t view it as an issue — not at this time. But that doesn’t leave Lucid completely off the hook in my eyes either. The company said on its last earnings call that it has strategies in place to mitigate the supply chain disruptions. If those don’t begin to manifest soon, that’s the time to worry.

Slow and Steady Is the Way to Approach LCID Stock 

I’m not a fan of high-pressure sales pitches. And I know that even experienced investors can feel pressure to buy a stock “right now.” So I’m here to say that’s not the case with LCID stock. In the short term, I don’t see it making a strong move in either direction. The company is still in the process of scaling its production. And it also has plans to release new models.

The real growth isn’t likely to happen until 2025. That can be frustrating for investors who are looking for short-term returns. But if you have a long-term outlook, scaling into a position in LCID stock over time still looks a fantastic opportunity.

On the date of publication, Chris Markoch 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.

Chris Markoch is a freelance financial copywriter who has been covering the market for over five years. He has been writing for InvestorPlace since 2019.