What happened
May was a hard month for the broader stock markets, but not for investors who own shares in Lucid Group (LCID 2.52%). It was, in fact, the best month so far this year for the electric vehicle (EV) stock, as it ended a month on a positive note for the first time since October 2021. Lucid stock trounced the market and surged 11.6% in May, according to data provided by S&P Global Market Intelligence.
The EV stock seems to have finally found a bottom, and there's a chance it'll likely sustain momentum.
So what
Lucid entered May with a big order from Saudi Arabia, which is also a major investor in Lucid through its sovereign wealth fund. The Saudi Arabian government signed an agreement with Lucid committing to purchase 50,000 EVs, with an option to purchase up to 50,000 more vehicles over the next 10 years.
The EVs will be built in Lucid's Arizona facility as well as an upcoming plant in Saudi Arabia, and the company is expected to start delivering EVs to the nation by the second quarter of 2023. It is initially expected to sell 1,000 to 2,000 EVs per year under the agreement, and then go up to 4,000 to 7,000 EVs per year from 2025.
The order lifted investors' confidence in Lucid, especially after the company shocked the market in March when it said it'll produce only 12,000 to 14,000 vehicles this year given the supply and cost constraints.
To investors' chagrin, Lucid reiterated its production target in May, and said it delivered only 360 vehicles in the first quarter that brought in revenue worth $57.7 million.
Image source: Lucid Group.
It was only in later days, when Lucid announced its international plans, that investor interest in the stock started to pick up.
Lucid confirmed its plans for Saudi Arabia, setting the stage for the construction of a plant with an annual capacity of 155,000 vehicles. Agreements with the Saudi Arabian government also included financing and incentives worth $3.4 billion over the next 15 years to help Lucid set up a manufacturing base in the region.
Meanwhile, Lucid opened its first retail outlet in Germany in May, also its first in Europe. That paves the way for the launch of two versions of its flagship luxury sedan, the Air Dream Edition P and the Air Dream Edition R, in four European markets this year, including Germany, Norway, the Netherlands, and Switzerland.
At 520 miles, the Air Dream has the longest official range rating among EVs and offers almost 100 miles more than closest competing car, Tesla's Model S. Lucid is delivering 520 Air Dream Editions in the U.S., and will take limited orders in Europe and start delivering later this year.
Importantly, Lucid will also sell other models -- the Air Pure, Touring, and Grand Touring -- across Europe, and said it was accepting reservations from as many as 14 European countries.
Now what
One number stood out from Lucid's Q1 earnings report: It estimates sales worth $2.9 billion if all of its 30,000-plus reservations of May 5 convert into orders.
With Lucid stock plunging almost 29% in April, its rising reservation numbers, order from Saudi Arabia, and expansion plans for Europe last month gave investors the perfect opportunity to hit the buy button on shares of the luxury electric car maker.
Lucid has a busy year lined up -- while it launches in Europe, it expects to start deliveries of the Air Grand Touring this month in the U.S., followed by the Air Touring and Air Pure later this year. All of these should start adding value to its top line, and as long as its revenue grows, investors could continue to bet on the growth stock.
