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Why Now Is NOT the Time to Buy Lucid Stock

It’s indisputable that electric vehicle (EV) manufacturer Lucid Group (NASDAQ:LCID) is eyeing the Saudi Arabian automotive market as a potential revenue source. Will this be enough to counterbalance Lucid’s problems at home in the U.S., though? Don’t get your hopes up, as major financial issues could weigh heavily on LCID stock in 2023.

Lucid Group makes vehicles that are luxurious but expensive. The base-level Lucid Air Pure model starts at $87,400, while other Lucid EV models might set you back as much as $179,000. So, don’t count on Lucid benefiting from $7,500 tax credits from the U.S. government anytime soon.

That’s going to make it difficult for Lucid Group to compete with the likes of Tesla (NASDAQ:TSLA) and Ford (NYSE:F) during a time of high U.S. inflation. Maybe Lucid could succeed in another country, though — or at least, that’s what some shareholders are probably hoping will happen. Yet, irrespective of any ventures abroad, Lucid Group needs to demonstrate fiscal improvement before skeptical investors should get involved.

Saudi Arabia Takes a Hefty Stake in LCID Stock

After only delivering 4,369 EVs in 2022, and only producing 7,180 vehicles after having previously predicted that it would produce 20,000 EVs last year, Lucid Group really needs to step it up in 2023. That’s not likely to happen, though, as Lucid issued modest production guidance of 10,000 to 14,000 vehicles for this year.

And again, Lucid Group will probably have difficulty selling many of its pricey EVs when Tesla, Ford and other automakers provide fierce competition. Perhaps, though, Lucid can succeed elsewhere — particularly, in Saudi Arabia.

Saudi Arabia’s sovereign wealth fund, known as the Public Investment Fund (PIF), added a nearly $1 billion position in LCID stock earlier this year. (Sovereign wealth funds, broadly defined, allow governments to invest surplus capital.) Moreover, there’s an unconfirmed rumor that the PIF wanted to buy out Lucid Group completely.

Additionally, Saudi Arabia’s government reportedly committed to purchasing 100,000 Lucid EVs over 10 years. Plus, Lucid has already commenced deliveries of its Air model EVs in Saudi Arabia. There’s also a tweet indicating that Lucid Group’s first Saudi-assembled vehicle “is going to hit the road by September 2023.”

Lucid Group’s Problems Haven’t Gone Away

There’s no guarantee that Lucid Group will sell many vehicles and generate strong revenue from its activities in Saudi Arabia. Prospective LCID stock investors should wait for financial results from Lucid’s foray into the Saudi EV market before placing any trades.

In the meantime, the data that is currently available doesn’t bode well for Lucid Group. We’ve already discussed the company’s disappointing production and delivery figures. It’s also problematic that Lucid’s cash and cash equivalents dwindled from $6.26 billion as of Dec. 31, 2021, to just $1.74 billion a year later.

It looks like Lucid Group’s financial hole will be hard to climb out of. The company posted a $749.74 million loss from operations in 2022’s fourth quarter. That’s substantially worse than the $485.68 million loss from the year-earlier quarter.

Now Is Definitely Not the Time to Buy Lucid Stock

It’s interesting that Lucid Group is aggressively pursuing the Saudi EV market and that the country’s PIF is taking a large stake in Lucid. Investors shouldn’t draw any hasty conclusions from these developments, though.

Lucid Group’s problems haven’t vanished, and the company’s loyal investors are still sitting on deep losses from the past year. Until there’s verifiable improvement in Lucid’s production, delivery and earnings figures, it’s wise to stay away from LCID stock.

On the date of publication, David Moadel 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.

David Moadel has provided compelling content – and crossed the occasional line – on behalf of Motley Fool, Crush the Street, Market Realist, TalkMarkets, TipRanks, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.

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