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Lucid Group: Is a Short-Squeeze Imminent?

Published 07/12/2023, 05:01 AM

Lucid Group (NASDAQ:LCID) is facing a major production problem.
To improve the situation, they launched a $3 billion public offering, which, however, resulted in a significant 20% dilutive effect on the value of their shares.
In the start-up phase, the capital increase is a necessary step to ensure the future success of the company. Now that it has enough funds to scale production, its production woes may end soon.
In 2022, LCID fell short of expectations, building just 7,180 EVs for the year. By comparison, Polestar (PSNY) produced 21,000 in the final quarter of that year alone. This decrease in production has caused waiting times to make reservations to lengthen, resulting in a dramatic drop in customer demand.
LCID plans to ramp up production at its plants in Arizona and Saudi Arabia. The first facility will have a capacity of up to 365,000 electric vehicles per year, while Saudi Arabia is expected to have 155,000 in 2025. To achieve this, however, plants need to have adequate financial support and capital, EV now has approximately $6 billion in liquidated funds, an unprecedented figure for an industry startup.
I believe that with the available funds, LCID is able to scale its production, meeting higher demand as lead times decrease.
A big plus is also the backing of the PIF, Saudi Arabia's sovereign wealth fund, which is one of the largest in the world.
By the end of 2022, the PIF has invested a whopping $915 million in LCID and placed an order to supply 100,000 vehicles to the Saudi government.
Current developments show that the PIF attaches great importance to LCID due to the development of its 'Saudi Vision 2030'. As a result, we can state that the PIF will provide continued support to LCID.

Saudi Arabia's Vision 2030 plan aims to create an economy less dependent on fossil fuels. To achieve this goal, the country is pushing more people into the private sector and investing in the electric vehicle market. This can be a big boost in such plans.
After several unsuccessful attempts to enter the traditional market, Saudi Arabia is trying to carve out a major role in the electric vehicle sector. Lucid's new EV factory is expected to be completed by 2025-26, and under the local EV brand Ceer, it is expected to produce 500,000 vehicles annually starting in 2030.
Saudi Arabia is ready to welcome Lucid's electric vehicles with open arms. They said they would purchase 100,000 vehicles from LCID over the next ten years for use by government employees. This move will help boost Lucid's image in the Middle East.
I am confident that with production underway in the region, Lucid will soon be able to export to developed Gulf countries. The UAE appears to be poised for the adoption of EVs and could prove to be a market full of opportunities for Lucid in the future.
In summary, the shares have recently priced in a capital raise with a drop in value, making this a good time to buy them, and have over 30% short interest.
This means that in the event of favorable quarterly reports or positive news, the stock could explode thanks to a short squeeze, with the stock easily reaching $16.

Author's note:

The information and content provided on this site should not be considered as an invitation to invest in the financial markets. The Content is a personal opinion of Dr. Antonio Ferlito.

Latest comments

Recently, Lucid's stock price has fluctuated as well as the charging sector. Well, the charging sector is currently undervalued, especially the Chinese charging leader NAAS (NASDAQ: NAAS), which has a monopoly advantage.
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