What happened
Shares of Lucid Group (LCID -0.69%) have been on the decline since the company reported its quarterly financial and operations update at the end of February. Shares have sunk about 14% since Feb. 28, even with a two-day recovery rally. That recovery continued this morning, with the stock popping over 5% at the market open. As of 10:15 a.m. ET, shares remained up 3%.
So what
Investors sold Lucid shares when the electric vehicle (EV) start-up announced it was cutting its production outlook for 2022 by up to 40% due to supply chain challenges and as it focused on quality.
Image source: Lucid Group.
At the same time, market dynamics and geopolitics are giving investors reasons to want to own stocks in the alternative and renewable energy sector, as oil prices soar to multiyear highs. Lucid also provided details on international expansion plans, and investors now seem to be prioritizing the long-term picture over the short-term headwinds.
Now what
Lucid expects to start construction on its first manufacturing plant outside of the U.S., and second overall, in the first half of 2022. The Saudi Arabian factory is partially the result of the company's relationship with the Saudi sovereign wealth fund, which is a large shareholder in Lucid. That plan has garnered more attention as oil prices have been rising sharply.
Investors may also be watching to see what fellow EV start-up Rivian Automotive tells investors regarding costs and supply chain issues when it reports its fourth-quarter results tomorrow. The stocks of both companies are down significantly from their peaks.
With more EV competition from legacy automakers coming on line, cost inflation and supply chain constraints could hit the younger companies the most. Investors need to balance that shorter-term picture with the long-term potential demand for electric vehicles. Even without those headwinds, these should be considered long-term investments with volatile share prices expected.
