After a bruising 2022, how will electric vehicle (EV) manufacturer Lucid Group (NASDAQ:LCID) treat its loyal investors during the next 12 months? It’s hard to envision a strong bull case for LCID stock as there no clear positive catalysts.
Lucid did raise capital recently, but it wasn’t “free money” by any means. Moreover, the automaker’s potential venture into China could prove to be a costly error.
Let’s be perfectly frank. If a company isn’t turning a profit, it’s very risky for the management to consider expanding into other markets. Some folks might even call it foolhardy or arrogant.
Multiple reports indicate that Lucid Group is preparing to expand into a highly competitive regional EV market. This may just be a last-ditch effort to save a startup business that’s not doing particularly well at home. Cautious investors are certainly welcome to watch this unfold from the sidelines, but should resist any temptation to jump into the trade.
What’s Happening with LCID Stock?
Believe it or not, LCID stock was worth $45 approximately one year ago. When 2022 came to a close, Lucid Group shares traded for less than $7 apiece. That’s a dreadful performance, and the company hasn’t provided compelling reasons to envision a turnaround in 2023.
Some of Lucid’s supporters will likely point out that the company enacted a “successful capital raise of approximately $1.515 billion” in December of last year.
How should we define “successful,” though? The capital was generated through an “at-the-market” equity offering program. This basically means the company sold shares directly to the market.
Was it an act of desperation for Lucid Group to sell over 56.2 million common stock shares? And, how will the prior shareholders feel about this? These are valid questions that prospective investors should consider. Remember, selling millions of shares doesn’t mean the company is printing “free” money, as there could be share-dilution concerns to consider.
Be Wary of This Potential Move
Here’s yet another question to ponder: Is this really an ideal time for Lucid Group to expand its operations? Bear in mind, Lucid had no earnings last year. It was one quarter after another of negative earnings per share (EPS).
Yet, there are multiple reports that Lucid Group is likely preparing to enter into the Chinese EV market. This is already a highly competitive market, but Lucid’s management will still probably move forward with the expansion plans.
Thus, Lucid Group will likely incur vast expenses for hiring, marketing, production and so on. There’s absolutely no guarantee that Lucid’s audacious venture into China will succeed on any level.
LCID stock dropped after investors learned of the company’s potential foray into China. They undoubtedly understand how difficult it will be for the already-unprofitable Lucid Group to try to generate income in multiple continents.
What You Can Do Now
Lucid Group’s capital raise really isn’t anything to celebrate. It’s the result of a share sale, and this may be a sign that Lucid is desperate for money.
Additionally, Lucid’s potential foray into China’s EV market is likely to be unprofitable, just like the automaker’s U.S. operations. Truly, there are no overwhelmingly positive catalysts to report when it comes to Lucid Group. Therefore, it makes sense for investors to stay on the sidelines as LCID stock appears to be destined for another awful year.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.