Lately, a lack of news has been good news for investors in Lucid Group (NASDAQ:LCID) stock, which plunged during late February and early March. This was primarily because of the electric vehicle maker’s release of disappointing quarterly results and guidance.
However, since the middle of this month, LCID has found support, with the stock bouncing between $7 and $8 per share. To some, this may look like a worthwhile entry point. After all, the latest developments appear to be fully absorbed by the market. This leaves shares poised to rebound when more positive developments arrive, right?
Not so fast. Lucid’s sell-off may be far from over. There’s little sign that the next wave of news will be of the positive variety. In fact, Lucid’s next earnings release (less than two months from now) could end up sending the stock to prices substantially below present levels. Here’s how.
| LCID | Lucid Group | $8.04 |
Be Wary of Calm Waters
When it comes to investor sentiment for early-stage EV stocks so far this year, one can say that it has been a bit of a rollercoaster ride. At the start of 2023, the market warmed back to Lucid Group, as well as to similar names such as Rivian Automotive (NASDAQ:RIVN).
LCID stock of course also received a short-lived lift from widely reported takeover rumors during this time. However, by mid-February, Wall Street’s renewed bullishness for EV contenders waned once again, quickly reverting to bearishness. With Lucid, this shift intensified upon the company’s aforementioned quarterly earnings release.
As I have discussed previously, Lucid not only fell short in terms of vehicle deliveries and 2023 production guidance. It also severely underwhelmed with its latest reservation figures, which signaled that this brand is facing difficulties building up a customer base.
After slipping further in the weeks following the Feb. 22 earnings report, the waters have calmed once again. Outside of some small-potatoes press releases touting the opening of new retail studios, there’s been little news out of the company. Another round of volatility may be just around the corner, so be wary.
The Next Big Event for Shares
As InvestorPlace’s Eddie Pan reported March 14, the next big event for Lucid Group is the company’s annual shareholder meeting on April 24. Yet the next event that stands to have a major impact on the LCID stock price is the May 9 quarterly earnings release.
Much like the recent earnings release, the primary focus will probably be on whether Lucid is living up to its current production guidance for this year (between 10,000 and 14,000 vehicles), but another factor may end up being top of mind as well.
That would be the company’s cash burn. In the past month, sell-side analysts have adjusted their estimates for net losses during the current quarter, raising this figure from 33 cents to 39 cents per share. Still, although bracing for additional heavy losses, the reporting of high cash burn once again may underscore Lucid’s need to once again raise additional cash through dilutive means.
You may recall how shares sank in December, after a $1.515 billion dilutive capital raise. The prospect of more dilution, alongside a lack of progress in production/deliveries, could spark another plunge.
Bottom Line
Admittedly, it is difficult to pinpoint how much further LCID could fall, if the company drops another round of downbeat updates on May 9. However, even a moderately lackluster earnings release may be enough to push the stock back down to its 52-week low ($6.09 per share).
Looking beyond just the next two months, the LCID sell-off may have plenty of runway. While tough to value this enterprise given its severe lack of profitability, the stock trades at more than three times book value.
Further erosion of confidence in the Lucid “story” could in time push shares closer to underlying book value, similar to the situation with Rivian, which today trades at a slight discount to book.
So, what’s the takeaway here? At high risk of experiencing continued big declines, sell/avoid LCID stock.
LCID stock earns a D rating in Portfolio Grader.
On the date of publication, Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article.
The InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.