Why Lucid Stock Lit Up Today
What happened
Shares of Tesla rival Lucid Group (NASDAQ: LCID) powered higher on Monday, rising a solid 6.5% as of 2:15 p.m. ET as investors read an upgrade for Tesla and wonder if it might mean good things for Lucid stock, too.
So what
This morning, Swiss megabank Credit Suisse upgraded shares of Tesla stock to outperform.
Credit Suisse loves Tesla for its fast growth, high profit margins, and its potential to earn as much as 25% more this year than anyone else on Wall Street thinks possible -- three factors that may not necessarily hold true for Lucid, which is just getting its EV business up and running.
And yet, Credit Suisse also pointed out that Tesla has an advantage over legacy automakers such as Ford Motor Company and General Motors: As a pure play EV maker, Tesla does not need to "tackle the challenges that legacy OEMs must address [including] margin dilution, manufacturing transition, [and] distribution," as they switch from doing what they're good at (gasoline cars) to doing what they're new at (electric cars).
Image source: Lucid Group.
Now what
And this is an advantage that might be true for Lucid as well. Like Tesla, Lucid is building an EV business from scratch, and free of all the added costs of trying to transition from an existing internal combustion engine car business. Like Tesla, Lucid is vertically integrated. And like Tesla, Lucid is sitting atop a pile of cash -- albeit a smaller pile than Tesla's -- about $7 billion tall. Why, Lucid is even following in Tesla's tire tracks by selling first an upscale luxury EV (that costs $170,000), with plans to offer lower-priced EVs later, after it gains scale.
While Lucid isn't a 100% mirror image of Tesla, the companies look similar enough that, if investors believe Credit Suisse's bull thesis on Tesla today, it makes sense that they might like Lucid stock as well.
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool owns and recommends Tesla. The Motley Fool has a disclosure policy.
