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Despite the Decline of Its Shares, Lucid Still Has a Good Chance to Succeed

InvestorPlace - Stock Market News, Stock Advice & Trading TipsLucid's platform and leadership are well ahead of most of its EV rivals. They should help LCID stock outperform.The...

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This story originally appeared on InvestorPlace

InvestorPlace - Stock Market News, Stock Advice & Trading Tips

Investorplace.com - InvestorPlace

Lucid Motors (NASDAQ:LCID) is one of the big, new electric vehicle (EV) companies looking to compete with Tesla (NASDAQ:TSLA) for leadership in this emerging industry. As far as LCID stock, its outlook is mixed.

A photo of the Lucid Motors Air EV from 2018.
Source: ggTravelDiary / Shutterstock.com

So far in 2022, Lucid has fallen by more than a third. That's not great. However, the retreat came after a dazzling rally by the shares at the end of 2021. Over the past six months, Lucid's shares are still up more than 20%. That's much better than most of the other EV stocks did.

LCID stock is trending downwards now, but the shares are still within their previous trading range, rather than slumping to new lows.

What explains the strength of Lucid's shares compared to those of its peers? Unlike so many of the other EV startups, Lucid has a strong management team, a realistic business model, and a real shot at success.

Only time will tell if the company will be successful. However, unlike many of its peers, Lucid is still worth following,.

Lucid Has a Strong Management Team

Many EV companies have gone public via special purpose acquisition companies (SPACs) over the past two years. Most of these firms have failed tremendously, at least from the point of view of those who bought their stock. The majority of these EV SPACs are now trading below their initial $10 offering prices, and some of them are already 50% or more below $10.

Many failed EV firms lack good leadership teams. These companies, which merged with SPACs, told investors great stories that did not stand up to scrutiny. In other words, these EV makers have released great projections and estimates that they failed to meet.

Lucid, by contrast, has a better outlook. First of all, its CEO, Peter Rawlinson, previously worked as Tesla's vice president of engineering. Hiring a leader like that is the best way for a competitor to beat Tesla. And Lucid's vice president, Derek Jenkins, formerly headed up design operations for Mazda's North American subsidiary. Hiring a leadership team of that caliber can realistically enable Lucid to compete against both Tesla and veteran automakers.

Lucid's Past Ups and Downs Have Made It Stronger

Giving Lucid another key advantage over many of its EV peers, the company has been in business for more than a decade. And for a long time, it has worked on producing components, such as powertrains, battery packs, motors, and inverters for buses and high-performance vehicles. The batteries that Lucid made for Formula E — an electric-car racing league — helped Lucid become adept at organizing supply chains and meeting the demand of its customers.

Unfortunately, Lucid ran out of money during this time and had to be restructured. During that process, however, it was able to raise a ton of funds from influential backers, establishing itself as a formidable player in the EV space. Arguably, the fact that Lucid has delivered products and endured financial problems make it a more mature competitor compared than many other EV start-ups.

As a result, the decline of LCID stock won't cause its employees or customers to give up on the company. Lucid is well-equipped to survive and thrive over the long term in the EV market.

Making Good Progress on Multiple Fronts

Lucid has roughly $6.8 billion of cash, putting it in a good position to challenge Tesla. Lucid is already ramping its operations in the U.S. and is looking to expand in China, Europe, and the Middle East, among other markets.

The company intends to deliver 20,000 vehicles over the course of this year. That will generate meaningful revenues for the company. Perhaps more importantly, those sales will get people talking about the company, increasing the effectiveness of its marketing efforts. Lucid has already generated substantial buzz, but now it's time for the automaker to really step up its efforts on that front.

The Verdict on LCID Stock

From a technical point of view, the risk/reward ratio of Lucid's shares seems reasonably good. LCID stock spent much of 2021 right around the $20 mark. Every time the stock fell, it attracted buyers at or around that price.

With that in mind, it could make sense to trade the shares now, relying on $20 as support and aiming for a run back to the mid-$30s or higher. Given the fact that a massive 17% of Lucid's shares are being shorted, the bears could run into problems in a hurry.

So many other EV stocks have totally collapsed over the past few months. Lucid, by contrast, is still hanging in there and could come roaring back to life when the market becomes more bullish on speculative stocks.

That said, for longer-term investors, Lucid must still show more tangible proof that it will be successful. Rawlinson, its CEO, is inspiring, and now it's time for his vision to start yielding measurable results.

On the date of publication, Ian Bezek 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 InvestorPlace.com Publishing Guidelines.

Ian Bezek has written more than 1,000 articles for InvestorPlace.com and Seeking Alpha. He also worked as a Junior Analyst for Kerrisdale Capital, a sizable New York City-based hedge fund. You can reach him on Twitter at @irbezek.

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