After another year of poor performance, Lucid Group (NASDAQ:LCID) investors are perhaps looking to 2024 as the year LCID stock finally embarks on a comeback.
There are many ingredients in place to fuel a further rally for speculative growth stocks, including EV stocks. So, with this in mind, will Lucid benefit from the rising tide of a new bull market?
Not so fast. Although improvements to the macro picture may help to send the market further into “risk on” mode over the next twelve months, a 2024 bull market may differ from the runaway bull market experienced during the pandemic era, especially with vehicle electrification plays.
Although investors may be more willing to factor future potential into current prices, fundamentals matter a lot more than before. Safe to say, that’s bad news for Lucid, given how the situation is playing out.
LCID Stock: Not Yet Back in the Fast Lane, and for a Good Reason
Thanks to news of cooling inflation, plus growing speculation about interest rates moving back lower during 2024, investors have cycled back into EV stocks over the past two months. Tesla (NASDAQ:TSLA) shares have trended higher during this time frame.
Other high-profile EV startups like Rivian Automotive (NASDAQ:RIVN), have also experienced a boost as of late. However, LCID stock has yet to re-enter the fast lane, and there’s a good reason for this. Although I am skeptical about the sustainability of Rivian’s latest rally, I can understand why this other top “EV contender” has become popular once again.
Rivian has recently announced a new commercial fleet sales order. The sell-side community has also been vocal in its bullishness for RIVN. LCID has had little but negative news to accompany the macro-related positive developments.
For example, the unexpected resignation of its CFO, Sherry House. Last week, I discussed this red flag, plus another recent bit of disheartening news: the removal of LCID from the Nasdaq 100 index.
As you may also recall, back in November, Lucid reported weak sales and big losses for Q3 2023, and provided a downward revision to its full-year production outlook.
Why Possible Improvements Will Likely Prove Insufficient
Weighing the bevy of bad news regarding LCID stock lately, against the positive of a upward trending broad market, it’s clear the bad still outweighs the good (improvements to the economic environment) here.
Yes, it’s possible Lucid’s delivery/sales numbers have nowhere to go but up. The company is making progress with its production ramp-up in Saudi Arabia. With the Saudi Government a major backer, there will likely be sufficient demand for the vehicles produced at this facility.
Still, what about Lucid’s fledgling U.S. operations? Even if lower interest inflation/interest rates help to raise EV demand, remember that this brand has gained little traction in the American EV market. All bets are off whether the launch of new vehicle models, like the Gravity electric SUV, will do anything to change this.
As the company keeps struggling in the U.S., Saudi-driven improvements to the top line aren’t going to be enough to make up the difference. Even if overall sales rise, heavy losses/cash burn are likely to persist.
This points to a continued need for dilutive equity raises. Shareholder dilution has been a big reason behind the stock’s horrendous performance since 2021.
Lucid Shares Will Keep Floundering
Despite my skepticism about RIVN, positive market trends may sustain its current trajectory. For shares in established EV makers like Tesla, a return to “risk on,” plus the prospect of improving economic conditions, suggests strong performance will carry on in the new year.
With Lucid, however, expect a different scenario to play out. This stock will continue to flounder, no matter the market’s next direction. Even if a new bull market takes shape, barring improvements in its U.S operating performance, shares in this EV “also-ran” could keep getting the cold shoulder.
Worse yet, if a bull market doesn’t emerge, and EV demand trends fail to improve, Lucid shares may be especially hard-hit.
Considering this lose/lose proposition, “stay away” once again remains the best move with LCID stock.
LCID stock earns a D 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.
