One Thing Needs to Happen for Lucid Stock to Keep Climbing Higher
Lucid (NASDAQ:LCID) stock has managed to climb 48% since its IPO date on July 26, 2021. The hype surrounding the stock seems endless as it appears to be a viable threat to the electric vehicle throne. In fact, many tout it as the “Tesla killer.” However, the road forward isn’t necessarily as simple as it seems.
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To really become successful and push LCID stock meaningfully above its current levels, Lucid needs to soon start generating strong, positive buzz surrounding its electric vehicles.
Buzz has two main elements. One is widespread coverage in mainstream media outlets. The other is massive volumes of discussions about a product or service on social media and via other forms of communications.
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Apple and Tesla Succeeded Largely Because of Buzz
Yes, Apple (NASDAQ:AAPL) and Tesla (NASDAQ:TSLA) have always had wonderfully designed, very convenient products. It’s true, for example, that the first iPod had more storage than competing MP3 players and that Tesla was (that I know of) the first major automaker to offer over-the-air updates. And the initial iPhones had more and easier-to-access apps than previous high-tech phones.
But I would argue that competing MP3 players, electric vehicles, and phones were well-designed and convenient, with important competitive advantages, too. For example, HTC’s devices and Fisker’s (NYSE:FSR) EVs were very well-designed, while BlackBerry phones (NYSE:BB) were extremely easy to use.
Also noteworthy is that both the early iPhones and Tesla’s EVs, throughout the automaker’s history, had important disadvantages. The early iPhones, I remember, had big problems with dropped calls, and Tesla, for many years, has had little and not-so-little technical problems with its EVs.
What really put Apple and Tesla way above their competitors, in my opinion, was not the overall quality or beauty of their products, but the fact that, for multiple reasons, their products and companies generated a great deal of positive buzz. That, in turn, lead to very strong demand for their offerings.
Among the reasons for their success in initially generating buzz were the pioneering nature of their products and the charisma and showmanship of their CEOs. But, as I’ll explain later, their uniqueness also helped a great deal.
Lucid Isn’t Generating Much Buzz So Far
Yes, the Lucid Air EV has generated positive reviews in tech and automobile-oriented publications, and business news outlets are enamored with Lucid. That spark – along with the company’s announcement that it has delivered a number of its EVs and the general rally of the EV sector – has lit a fire under LCID stock.
But for that fire to be sustained, Lucid will have to find a way to either get widespread coverage in popular media like The New York Times and MSNBC or become a major topic of conversation among tens of millions of consumers. After one of those conditions are met, the other will naturally fall into place as well and create a positive virtual cycle.
That is, if Lucid starts getting a great deal of coverage in the popular media, tens of millions of consumers will start talking about it, leading to more media coverage and increased word of mouth effects. And if tens of millions of consumers start talking about it, a similar process will occur in reverse.
But the company does not seem to be very close to accomplishing either target. On social media and in popular media outlets, I don’t see much evidence that Lucid is getting mentioned a great deal.
Lucid Has a Tougher Road Than Apple or Tesla
Apple first started benefiting from buzz in the current generation with the launch of the iPod in 2001. At that time, no other major company had yet introduced a highly successful MP3 player.
Similarly, when Tesla launched its first EV in 2008, no major automaker was yet selling a popular all-electric vehicle.
Lucid, conversely, is confronting many EV competitors, from Tesla to Volkswagen (OTCMKTS:VLKAY) to Fisker to Ford (NYSE:F) and General Motors (NYSE:GM).
As a result, in the current environment, I think that it will be much more difficult for Lucid to create a great deal of buzz than it was for either Apple or Tesla at the beginning of their booms.
The Bottom Line on LCID Stock
Lucid can keep running higher in the near term. But given the stock’s current market capitalization of $60 billion, it won’t keep climbing meaningfully in the longer term unless it shows more signs that its sales growth is accelerating. And those signs are unlikely to emerge without buzz.
So my advice for longer-term investors is to refrain from buying LCID stock until the automaker starts generating a great deal of buzz.
On the date of publication, Larry Ramer did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Larry Ramer has conducted research and written articles on U.S. stocks for 13 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been GE, solar stocks, and Plug Power. You can reach him on StockTwits at @larryramer.
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