Lucid stock just tanked. Is this a great buying opportunity?

Lucid’s share price has taken a hit on the back of the company’s Q4 results. Is now a good time to buy the EV stock? Edward Sheldon takes a look.

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Shares in electric vehicle (EV) company Lucid Motors (NASDAQ: LCID) are down heavily today on the back of the company’s Q4 2021 results. There were certain things in the results that the market didn’t like.

I’ve said before that Lucid has some really nice EVs (its Air model won the 2022 MotorTrend Car of the Year award) that could potentially help the company capture market share from Tesla. Has today’s share price fall created a buying opportunity for me then? Let’s take a look.

Why Lucid’s share price is down today

Looking at Lucid’s Q4 results, it’s not hard to see why the stock is down today.

For starters, guidance for 2022 was reduced significantly. Previously, Lucid was expecting to produce 20,000 vehicles this year. However, it has reduced its guidance to between 12,000 and 14,000 vehicles, due to supply chain constraints and component quality issues. This is obviously very disappointing as it means that revenues for 2022 will be far lower than investors had been expecting. 

Secondly, Lucid said that it will delay its second vehicle, an electric SUV called Gravity, to the first half of 2024. This was initially expected in 2023. CEO Peter Rawlinson said the delay is to refine the product, and provide more time to implement best practices from the launch of its first vehicle.

At the forefront of the EV revolution

There were also plenty of positives in Lucid’s results, however.

One was that customer reservations now exceed 25,000 units, reflecting potential sales of more than $2.4bn. That’s up from 17,000 units in November. This suggests that demand for the company’s EVs is high at present.

Another was that Lucid confirmed plans to build its first international assembly plant in Saudi Arabia. This is expected to begin production in 2025. The group believes this plant will help it achieve capacity of 500,000 in the years ahead. 

Additionally, management seemed very confident about the future. “We are at the precipice of a global transition toward electric vehicles, and Lucid, with our leading technology and design, is at the forefront of one of the most significant transformations in mobility in generations,” said Rawlinson. “We remain confident in our ability to capture the tremendous opportunities ahead given our technology leadership and strong demand for our cars,” he added.

This confidence from the CEO is very encouraging, in my view.

Should I buy Lucid stock now?

As for whether now is a good time to buy Lucid stock, however, I’m still not convinced that the valuation is attractive.

Even after today’s share price fall, Lucid still has a market cap of around $40bn. That strikes me as high for a company that has only produced around 400 EVs to date and is having some production issues. 

And I’m not the only one who sees the valuation as high. Morgan Stanley analyst Adam Jonas, for example, has a $16 price target on the stock. That’s much lower than the current share price.

Meanwhile, short sellers clearly believe the valuation is too high as well. At present, around 137m Lucid shares are on loan. That represents about 25% of Lucid’s free float – a very high level of short interest.

Given the high valuation, I’m going to leave Lucid stock on my watchlist for now.

All things considered, I think there are better growth stocks to buy at the moment.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Edward Sheldon has no position in any of the shares mentioned. The Motley Fool UK has recommended Tesla. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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