What happened
Lucid Group (LCID 2.73%) shares opened low and proceeded lower in early trading on the Nasdaq Stock Market Friday morning. By 9:45 a.m. ET, shares of the electric car start-up were down 9.7%.
I think you can blame Tesla (TSLA 2.22%) for that.
Image source: Lucid Group.
So what
Wednesday evening, as you've probably heard by now, electric car kingpin Tesla reported terrific results for its fiscal fourth quarter of 2021 -- sales up 65% year over year, profits well ahead of estimates, and profit margins surging across the board.
At the same time, however, Tesla also warned of "equipment capacity, operational efficiency and ... supply chain" difficulties that were impacting its business and "likely to continue through 2022."
Now what
In this way, Tesla's news was arguably bad news for Lucid in two different ways. On the one hand, Tesla's phenomenal success in sales is sewing up the electric cars market, and draining the supply of potential buyers for Lucid's cars.
On the other hand, the same supply chain difficulties that Tesla is facing could limit Lucid's own ability to ramp up production. On a conference call with investors after earnings were released, Tesla CEO Elon Musk spoke in particular of a "parts constraint" that would prevent Tesla's ability to introduce any new electric car models this year. On top of the supply chain problems, if Tesla is still getting its "capacity" and "operational efficiency" right-sized nearly 20 years after setting up shop, you have to figure that these are problems lying in wait for Lucid, too, as it just starts to get its business up and running.
Granted, after nearly two decades in business, Tesla has reached a point where its profits are consistently positive, and mostly growing for the past 10 straight quarters. That may prove true for Lucid, too -- eventually -- but it won't happen immediately.
Given the risks, a bit of caution on Lucid's sky-high stock price right now seems appropriate.
