There were some big news items making the rounds in the electric vehicle (EV) sector this week, and several stocks have been volatile as a result. Luxury EV maker Lucid Group(NASDAQ: LCID) is one of them.
Lucid stock has dropped by about 13% so far this week, even when factoring in its bounce Friday morning. That's because another EV start-up got a big upgrade. Analyst Alexander Potter at Piper Sandler moved Rivian Automotive shares from a hold rating to a buy early Friday, saying the stock could double. Lucid is riding the wave from that upgrade, even as investors are still concerned about the issues that drove the shares lower earlier this week.
Questions abound in the EV market
On Wednesday, reports emerged that EV start-up Fisker was working with bankruptcy consultants, as it has struggled to gain traction with its early electric vehicle sales. While the company has downplayed its work with those consultants, Fisker did issue a going-concern warning last month. The talk of a potential bankruptcy helped drive down the shares of other money-losing EV makers, including Lucid.
Rivian is also unprofitable, but the fresh dose of confidence from Piper Sandler's analyst has also helped Lucid bounce back a bit from its drop earlier in the week. Lucid has been struggling to increase sales of its luxury electric cars, though.
Investors need to count on two things for Lucid to potentially recover and prosper. It had about $5 billion in liquidity as of Dec. 31. It also has a deep-pocketed backer in the Saudi Arabian Public Investment Fund. It will likely need to continue to rely on that financial banking as it rolls out its second EV model.
Lucid rolled out its new fully electric Gravity SUV last month. For the company to ultimately succeed, that EV will need to attract enough customers. After the Piper Sandler analyst's positive report on Rivian, investors seem to see a path forward for Lucid as well. But Friday's bounce doesn't mean that path will be without bumps, and Lucid remains a highly risky investment.
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Howard Smith has positions in Lucid Group and Rivian Automotive. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
