Dividend Stocks

LCID Stock Alert: Lucid Preps for EV Production in Saudi Arab

A Lucid (LCID) Air displayed in its own vitrine in Madison Square Park in New York. Lucid Motors started trading on the NASDAQ exchange via a SPAC merger.

Source: rblfmr / Shutterstock.com

Surprisingly, Lucid Motors (NASDAQ:LCID) stock is little-changed today despite news that the company has received a license to produce its electric vehicles (EVs) in a “special economic zone” within Saudi Arabia. Shares did initially tick higher after the news but have still been on a downward trajectory in recent months, which appears to be weighing on the stock again today.

The company’s permit will allow for the production of Lucid vehicles in The King Abdullah Economic City (KAEC) near the Red Sea. This city is strategically important, as it’s near major waterways and “offers a solid location to establish a global supply chain network” but is also favorable from a tax perspective. Thus, for investors, this seems like a pretty decent bargain for a company looking to promote its luxury brand globally.

It’s also important to remember that Lucid previously received another $1.8 billion from Saudi Arabia’s Public Investment Fund (PIF) in June. This makes the Saudi government the majority owner of Lucid, for better or worse.

Let’s dive into what to make of this news today — and why the market appears to be brushing this off.

LCID Stock Is Little-Moved on Another Saudi Announcement

One theory that has been bouncing around in my head of late is that maybe U.S. investors just simply don’t want to own LCID stock based on who owns it. Some large institutional investors may not be able to invest in the company while others may balk at shares because of Saudi Arabia’s human rights record. Additionally, others may view Lucid as too late to the game in the luxury EV space.

Whatever the scenario, I think LCID stock should be up much more on this news than it currently is. Still, the company has had its fair share of struggles, to be sure. In terms of production, preorders and forward-looking demand, Lucid’s future is uncertain — and in this market, investors really don’t like uncertainty. That could be another mitigating factor coming into play today.

I think Lucid will need to really ramp up production in a meaningful way to see the kind of stock price bump many investors have been hoping for. There’s plenty to like about the company’s brand and its market positioning. However, right now, it’s also true that this is a difficult stock for many investors to own.

On the date of publication, Chris MacDonald did not hold (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 MacDonald’s love for investing led him to pursue an MBA in Finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative, long-term investing perspective.