Stock Market

Lucid Stock Has Several Positive Signs, But Lay off Until After Earnings

Investors should probably wait until after Feb. 28, when Lucid (NASDAQ:LCID) releases earnings, to move on LCID stock. That said, there are reasons to remain optimistic about the EV manufacturing company’s future. 

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Yes, it is a speculative play, but it is at least a speculative play that is momentarily in favor. On top of that, funding looks to be secure as Lucid enters its early growth phases. 

If the largest pension fund in New Jersey is any indication, LCID stock is among speculative plays worth considering. The State of New Jersey Common Pension Fund D, the state’s largest, recently shifted its asset portfolio. 

That was good news for Lucid investors. The fund disclosed in SEC forms that it exited its position in Alibaba (NYSE:BABA) in the fourth quarter. It initiated positions in Lucid, Rivian (NASDAQ:RIVN), and Coinbase (NASDAQ:COIN) during the same period.

The pension purchased 245,836 shares of LCID stock along with 104,442 shares of RIVN stock. The pension is clearly attempting to time a market bottom as it pertains to EV stocks. The news should also signal that EV stocks may be moving upward soon. 

Lucid share prices moved upward following the news, although correlation doesn’t equal causation. The other positive news is that Lucid looks to be well funded 

A Closer Look at LCID Stock 

For one, Lucid ended the third quarter with $4.8 billion in cash on its balance sheet. $4.4 billion of that came from the de-SPAC merger and a PIPE investment. That funding will be necessary as Lucid just began delivering vehicles to U.S. customers early in 2022. 

And Lucid already stated that it will expand into Europe and the Middle East this year, and China in 2023. But it appears that the Middle East will be particularly important to the firm moving forward. The company will look to Saudi Arabia for funding as it moves toward a 20,000 vehicle production volume this year. 

Lucid already has an established relationship with the country which looks to be expanding. Lucid’s largest shareholder is Saudi Arabia’s Public Investment Fund. 

That means Saudi Arabia has significant input into the direction the company will take. In this case that has resulted in Lucid being pushed to build manufacturing facilities in the Middle Eastern nation. 

Early indications are that it will result in a joint venture with significant funding from the PIF. That plant should be built in 2025 or 2026. Therefore, it looks increasingly likely that Saudi Arabia will play a large role in the early history of Lucid.

Saudi Arabia’s massive oil reserves should be a boon to Lucid as those revenues will finance part of the EV manufacturer’s future. But for now, investors will be keenly awaiting Lucid’s Feb. 28 earnings report. I wouldn’t move until those numbers are returned. 

And on top of that, Lucid has another issue. Its Casa Grande manufacturing plant is looking to add 1,000 additional workers.

However, there might not be enough housing and basic services for those workers It at least suggests that Lucid may not have done its homework thoroughly enough when choosing Casa Grande for its plant. 

What to Do

I see no reason to jump into LCID stock prior to the earnings release on Feb. 28. There are no indications that Lucid should perform particularly well. Right now it looks like funding is secure. That’s a positive. Otherwise, the company is working out some kinks.

The more interesting narrative concerns Saudi Arabia’s quickly-evolving role in the company. None of those things should upset the market though. Nor should they cause the market to react positively. I’d just wait for earnings before doing anything. 

On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

Alex Sirois is a freelance contributor to InvestorPlace whose personal stock investing style is focused on long-term, buy-and-hold, wealth-building stock picks. Having worked in several industries from e-commerce to translation to education and utilizing his MBA from George Washington University, he brings a diverse set of skills through which he filters his writing.