Why Is Lucid Motors (LCID) Stock Falling Today and Should You Buy Now?

Mohit Oberoi, CFA - Author

Sep. 1 2021, Published 8:47 a.m. ET

Lucid Motors (LCID) stock was trading sharply lower in the premarket on Sept. 1. The stock has been in a downtrend and has lost 16 percent over the last month. Why is LCID stock falling and should you buy the dip now?

Article continues below advertisement

Lucid Motors is arguably the most hyped SPAC merger of all time. Churchill Capital IV (CCIV) stock soared to as high as $65 just on rumors about its merger with Lucid Motors. Investors grabbed on to CCIV stock hoping to catch the next Tesla early.

Why is Lucid Motors stock falling today?

There hasn’t been any specific news related to Lucid Motors stock. The fall in LCID stock on Sept. 1 looks due to speculation that some of the PIPE investors would cash out. The lock-in period for PIPE investors is ending on Sept. 1. We’ve seen selling pressure in stocks when the lockup period expires.

Article continues below advertisement

That said, looking at the crash in LCID stock from the peaks and the positive outlook for EV (electric vehicle) companies, not many PIPE investors might look for the parachutes even though the exit option is available to them now. Saudi Arabia’s sovereign wealth fund PIF (Public Investment Fund), which anchored the PIPE deal, might continue to hold on to the stock.

Article continues below advertisement

NIO stock is falling on tepid deliveries

Another reason behind the fall in LCID stock on Sept. 1 could be the bearishness towards Chinese EV stocks. NIO is down sharply in the premarket after reporting weak August deliveries. The company also scaled back its third-quarter delivery guidance. The chip shortage situation has taken a toll on the company’s production. Earlier this year, NIO had to curtail production amid the chip shortage.

Article continues below advertisement

It's worth noting that EV stocks have generally moved in tandem. The rise or fall in one stock tends to impact other names also. The same holds for their valuations. While most EV stocks would appear overvalued when looked at in isolation, the valuation has been working on a derivative model. Tesla’s valuation has tended to set the benchmark for other EV stocks as well.

Article continues below advertisement

Should you buy the dip in LCID stock?

Lucid Motors should start delivering its vehicles soon. The company has a strong management team led by former Tesla executive Peter Rawlinson. Also, it's backed by the cash-rich PIF. From a product perspective, the Lucid Air Dream Edition boasts of an even higher range than Tesla Model S Plaid.

Generally, Tesla has had the lead over other automakers when it comes to range. Overall, Lucid Air has a strong value proposition and should be a worthy competitor to Tesla. The fall in LCID stock due to fears of PIPE investors exiting looks like a buying opportunity.

Article continues below advertisement

Jim Cramer on Lucid Motors stock

While we have several startup EV stocks to choose from, some of them are tainted names. Also, like Tesla, Lucid Motors has built an aura around the brand. Several observers, including CNBC Mad Money host Jim Cramer, see the company as a worthy competitor to Tesla.

Commenting on Lucid Air, Cramer said, “I think it's a gorgeous car that will have a lot of buyers.” While the initial euphoria and aura take LCID to a market cap above $30 billion, despite it being a pre-revenue company, it has to deliver on the execution part.


Latest Green Energy Stocks News and Updates

    © Copyright 2022 Market Realist. Market Realist is a registered trademark. All Rights Reserved. People may receive compensation for some links to products and services on this website. Offers may be subject to change without notice.