Electric vehicle (EV) company Lucid Group (LCID 2.96%) reports Q4 2021 earnings on Monday after market close. Investors should keep an eye on the company's core business, including production, deliveries, manufacturing, and spending plans.
However, they should also be on the lookout for updates on the company's retail service network, its partnership with third-party charging companies, the potential to license its technology, risks such as its dependence on Saudi Arabia, and a subpoena from the U.S. Securities and Exchange Commission (SEC). Here's how these points fit into Lucid's long-term investment thesis.
Image source: Lucid Group.
1. Retail service network
Lucid opened its 22nd studio/service center on Feb. 17. These locations will help prospective customers interact with Lucid's products and existing customers service their vehicles in the event of a recall or other problem.
Building out a large retail service network is vital for executing on a direct-to-consumer model since Lucid lacks the dealership partnerships available to legacy automakers. For context, note that Tesla has 149 U.S. service centers in major cities across 35 states.
2. Updates on charging partnerships
Unlike Tesla or Rivian Automotive, Lucid has elected not to build its own charging network, relying instead on the growing presence of third-party electric infrastructure companies. This should be a good long-term move because it will keep spending down. Investors should listen for updates on Lucid's partnerships with third-party companies, especially given the passing of the bipartisan infrastructure bill.
NASDAQ: LCID
Key Data Points
3. Licensing
Lucid has been open to licensing its technology to third parties as another way to make money. Speculation on the Apple (AAPL 1.58%) car and whether Apple could partner with Lucid has been rampant for months. There's no material backing for this claim, but it's worth listening in case Lucid provides any color on the potential for licensing as an additional revenue stream.
It's worth mentioning that licensing or any business proposal that threatens Lucid's control over its tech is unlikely given that the company has been very protective of its proprietary battery technology. After all, Lucid's compact and efficient battery pack is the main factor separating Lucid from the competition.
4. Dependence on Saudi Arabia
As of Sept. 30, 2021, Saudi Arabia's Public Investment Fund held a 62.7% stake in Lucid. On its Q3 earnings call, Lucid said that Saudi Arabia represented a key market and it could eventually build a manufacturing plant there. If the fund is loyal to Lucid's long-term growth, it could give the company stability and a core market outside North America and Europe. But it also leaves Lucid vulnerable if the fund decides it no longer believes in the value of holding a large block of Lucid stock.
5. Subpoena clarification
Lucid received a subpoena from the SEC on Dec. 3 calling forth certain documents. The exact reason for the SEC subpoena is unclear, but it was likely due to past lofty projections by Lucid that were grounded in speculation rather than fact.
Misleading long-term guidance has been an issue for SPACs, as it does a disservice to investors. Lucid needs to update investors on the severity of the subpoena and make sure any future long-term guidance is based on material fact and not guesswork.
Where to go from here
Q3 2021 marked Lucid's first report as a public company. The day after reporting earnings, Lucid stock rose 24% on Nov. 16. Given the volatility this earnings season, it wouldn't be surprising if Lucid stock makes a big move to the upside or the downside following its report.
The best way to separate your emotions from such a drastic short-term move is to stay up to date on the company's long-term investment thesis. Lacking fundamentals, Lucid is a company built on a story. The more Lucid can move from being a story stock to being a company with real revenue and earnings, the less it will be susceptible to speculation.
In the meantime, the best thing you can do as an investor interested in Lucid stock is to pay attention to the details while monitoring your exposure to Lucid. Be sure you are only taking on an amount of risk you are comfortable with. Like many speculative EV stocks, Lucid is best owned in a diversified basket of other EV stocks -- as part of an even more diversified portfolio -- to limit downside risk.
