Why Lucid Stock Is Plummeting This Week

What happened

Shares of Lucid Group (NASDAQ: LCID) are down big this week amid a multitude of market pressures. The electric-vehicle (EV) stock had slid roughly 28% from last-week's market close as of 12:00 p.m. ET on Friday, according to data from S&P Global Market Intelligence.

In addition to pressures from a potential conflict between Ukraine and Russia and macroeconomic concerns including inflation and rising interest rates, growth-dependent stocks have taken a beating following concerning business updates from high-profile companies. Tesla joined this cohort with the publication of its fourth-quarter results on Wednesday, and the EV-leader's guidance spurred big sell-offs for Lucid and other electric-vehicle stocks.

Red arrow going down across a stock chart.

Image source: Getty Images.

So what

Tesla's Q4 results actually topped the market's estimates, with the company posting earnings per share of $2.52 on sales of $17.72 billion, while the average analyst estimate had called for per-share earnings of $2.36 on revenue of $16.57 billion. However, CEO Elon Musk revealed the business would not be debuting any new vehicles this year due to ongoing supply constraints.

The disappointing guidance prompted investors to move out of Tesla and other EV stocks, and Lucid Group participated in the pullback. Meanwhile, there wasn't much in the way of company-specific news driving the EV stock's sell-off over the last week.

Lucid did publish a press release on Jan. 27 announcing that it was opening a new location in Newport Beach, California, bringing its total North American location count to 21, but the news had little impact on its share price.

Now what

Even after recent sell-offs, Lucid still has a market capitalization of roughly $45.5 billion and trades at approximately 21 times this-year's expected sales. The Lucid Air won the 2022 MotorTrend Car of the Year award, and the company had 13,000 vehicle reservations in the third quarter and ended the period with orders totaling approximately $1.3 billion. However, its growth-dependent valuation could lead to bumps in the road.

With Tesla signaling ongoing issues related to the supply of chips and other key components, Lucid Group could have a harder time ramping up vehicle production or face margin constriction. That sets up a high-risk, high-reward dynamic for investors.

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A Lucid Air vehicle.

Image source: Getty Images.

Keith Noonan has no position in any of the stocks mentioned. The Motley Fool owns and recommends Tesla. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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