Electric vehicle maker Lucid Group (NASDAQ:LCID) has not had a good run of things for the last few days, but today turned that around wonderfully. Lucid Group's gains stemmed from a new opinion on the company filed by Cantor Fitzgerald. There, analyst Andres Sheppard started coverage of the company by offering up a rating of "overweight." The biggest reason for the rating came from Lucid's car models.
The luxury and premium versions of Lucid Group cars offer a range of performance features that are superior overall to others in the market. Lucid beat its competitors in terms of vehicle efficiency, charging speeds, length of time and mileage the battery would hold a charge, and available space.
The word from Cantor Fitzgerald is certainly welcome. While not everyone seems to agree with the projections, there are certainly reasons to be encouraged. There are also reasons to be discouraged. For that reason, I'm going to come out cautiously bullish. There's upside to be had here but watch this one carefully if you choose to get involved.
There's Something Strange about Lucid Stock's Investor Sentiment
Investor sentiment tends to come in a straightforward fashion. Sometimes it's positive, sometimes it's negative, and sometimes there are bits of both. However, Lucid Group's investor sentiment metrics are an unexpected puzzle that will leave most scratching their heads.
Lucid has a 4 out of 10 Smart Score on TipRanks. That's the lowest level of “neutral.” It suggests a better-than-even chance that Lucid will ultimately lag behind the broader market.
It's Lucid Group's insider trading that might particularly puzzle observers, however. It's been nearly a year since the last informative transaction took place. Peter Dore Rawlinson's purchase of $101,136 in shares made quite a splash at the time, though it was followed by a sale nearly 200 times that size just a few months later that wasn't considered informative.
Aggregate figures of insider trading at Lucid Group produce an even stranger picture. In the last three months, there has been nothing but sell activity coming from Lucid insiders. There were eight sell transactions and no buy transactions.
Just before that, however, in May, there were 12 buy transactions staged and only one sell transaction that month. So if you consider the last four months, buying activity outpaces selling activity.
The last 12 months offer an equally puzzling picture. In aggregate, there were 22 buy transactions and 15 sell transactions. Of the 22, 12 took place in May, as noted previously. Another eight took place in September 2021, just ahead of Lucid's big run-up. The last two took place just after Lucid's highs in November 2021.
A Pretty Puzzling Picture for Lucid Stock
Before we start, let's go over what we have so far. We have an insider trading picture that comes in fits and starts, with big slugs of selling following big slugs of buying. We have a very mixed analyst picture as well, with an almost equal number of buy, sell, and hold recommendations, and now we have Cantor Fitzgerald coming out very much in favor.
Here's the problem with all this, however. The macroeconomic picture is about to fundamentally destabilize the entire electric vehicle market as we know it. We know there are serious supply chain issues wracking the entire industry right now. Just look at what happened to Li Auto (NASDAQ:LI) over the last few days.
Even Tesla (NASDAQ:TSLA) has had its share of troubles. The company's gigafactory in Berlin suffered a fire in its recycling plant. That proved enough for locals to demand the company shut down production therein. However, the locals in question pursued production halts before the factory even opened.
Things only get worse from there, though. New reports suggest that, in the U.K., there will soon no longer be a cost advantage to driving an electric car. The reports note that charge points now cost approximately the same amount as gasoline.
Drivers reportedly pay 18 pence (about $0.18 USD) per mile for electricity in the U.K. That compares to 19 pence per mile for gasoline and 21 pence per mile for diesel. Electricity costs are lower at home. However, most customers can't charge electric vehicles therein.
That's just for starters, though; consider the costs of electric vehicles currently. While incentives are still in place all over the world, the current economic pressures faced in many countries may see these incentives grind to a halt.
Throw in rapidly rising interest rates, and the notion of buying a new car—gas or electric—may be gone with the wind. It only gets worse when the inflationary conditions at the grocery store are still fully in play.
Sure, buying an electric car might prevent the sticker shock at the gas pump, but the sticker shock at the electric meter will likely increase over its current levels. Especially if customers now need to charge a vehicle as well.
What is LCID Stock's Target Price?
Turning to Wall Street, Lucid Group has a Moderate Buy consensus rating. That's based on three Buys, one Hold, and one Sell assigned in the past three months. The average Lucid Group price target of $22 implies 51.2% upside potential. Analyst price targets range from a low of $18 per share to a high of $28 per share.
Conclusion: There are Reasons to Believe and Doubt LCID Stock
Lucid Group stands as an oddly balanced proposition right now. There's optimism out of the analyst quarter and murky optimism from the insider sector. The best news out of Lucid right now is that it's plunged about as far as it can without completely closing up shop.
Since the company is trading well below its lowest price targets, that suggests a good, quiet way to get in for little initial outlay. Cantor Fitzgerald citing the company for the quality of its vehicles definitely helps, too.
In marketing terms, price is one of the worst ways to compete. It's an easy win, easily lost strategy; all anyone else has to do is lower their price to remove that advantage.
Being competitive on a product, however, is different. It takes research and innovation to beat a competitor based on product. That's going to give Lucid Group a bit of an edge it can talk about for quite some time.
Thus, I'm cautiously bullish on Lucid. There's a lot of room to go up here and not much more room to go down.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
