Will Lucid Motors Stock Be the Next Big EV Story After Tesla?

Mohit Oberoi, CFA - Author

Sep. 17 2021, Published 11:43 a.m. ET

Lucid Motors (LCID) stock has been very volatile in September. We saw selling pressure earlier in the month on fears that PIPE (private investment in public equity) would exit as the lock-in period ends. However, the stock has since been in an uptrend as those fears abated. How high can LCID stock go and can Reddit traders trigger a short squeeze in the stock?

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Lucid Motors is led by a former Tesla (TSLA) engineer Peter Rawlinson. There are also several similarities between the two companies including their manufacturing and sales and distribution approaches. However, the two companies have taken divergent paths when it comes to charging networks. While Tesla has built its own network of supercharges, Lucid has gone for a tie-up with Electrify America.

Is Lucid Motors the next Tesla?

Brokerages have a divergent view on whether Lucid Motors is the “next Tesla.” While Citi doesn't see the company as the next Tesla, Bank of America has compared LCID with Tesla and Ferrari.

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Incidentally, while Bank of America issued a bullish note on LCID stock, it downgraded fellow startup EV company Fisker from a buy to neutral and lowered the target price from $27 to $18.

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Jim Cramer thinks that Lucid Motors could be the next Tesla. Overall, from an initial hype perspective, LCID has managed to establish itself in almost the same league as Tesla. During its merger presentation, the company compared itself with Tesla on multiple occasions.

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Is a short squeeze coming in LCID stock?

LCID stock is getting popular on Reddit group WallStreetBets, which has led to speculations that it could be the next short squeeze candidate. Incidentally, Tesla has built its image as a short-seller killer and CEO Elon Musk takes frequent jibes at short-sellers.

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In 2020, Musk launched Tesla short shorts to poke fun at short-sellers who lost billions betting against the stock. Michael Burry has been the most recent Tesla bear. Burry increased his bearish bets on TSLA in the second quarter of 2021.

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Talking of Lucid Motors, according to Fintel, its FINRA short volume was 6.8 million shares on Sept. 16, which was a little above 38 percent of the total FINRA volumes that day. The short volumes look high enough for a squeeze.

Also, later this month, Lucid Motors is scheduled to hold a Lucid Air production preview event starting on Sept. 27. A positive response to the event and any subsequent analyst upgrades or new buy recommendations could help trigger a rally in LCID stock. If the short interest is high around the event, there could be a good opportunity for a short squeeze.

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How high can Lucid Motors stock go?

Currently, Bank of America has a street-high target price of $30 for Lucid Motors stock. Given the upcoming catalysts, the stock could reach $30 price levels sooner than many anticipate.

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While the entire EV space might look bloated, LCID doesn't seem overvalued compared to Tesla. However, Lucid Motors faces execution risk especially since it's building its cars, unlike peers like NIO who have gone for a third-party tie-up.

The Air production preview and the subsequent deliveries of the model would somewhat help address the execution risk for Lucid. For now, bulls seem in charge of the stock as bears burn their fingers in yet another short-seller killer EV stock.


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