Tuesday, 12 December 2023

Why Lucid Shares Dropped Today

by Earn Media

Shares of Lucid Group (NASDAQ: LCID) may have moved higher by more than 20% over the last month, but the future looks less bright today. The stock reversed course Monday after news came out about the company’s stock listing status.

That led shares to plunge as much as 5% in early trading. Lucid stock trimmed those losses but remained down by 2.5% as of 11:15 a.m. ET. For the year, Lucid shares have dropped by more than 30%.

Out of the Nasdaq-100

Today’s drop came after the announcement that Lucid would be one of the six companies removed from the Nasdaq-100 index as a result of that stock index’s annual changes. Other names being replaced include online marketplace eBay, solar system provider Enphase Energy, and Zoom Video Communications.

The Nasdaq-100 was launched in 1985 and is composed of 100 of the largest nonfinancial companies listed on the Nasdaq Stock exchange.

More to worry about

The news in itself isn’t the real problem for Lucid. Components of the Nasdaq-100 are adjusted every year in December, and it is more a reflection of past poor performance. The problem for investors should really be what caused that past poor performance. That’s where Lucid shareholders should be concerned.

After its third-quarter report, Lucid lowered its vehicle production guidance for the second time in under a month to about 10,000 units for all of 2023. The company said it would help increase financial flexibility.

The numbers behind its financial concerns are the problem. Lucid is burning cash as it struggles to add sales volume. Lucid is losing nearly $340,000 for every electric vehicle (EV) it makes in 2023, according to Bloomberg Intelligence.

So while the stock did take a hit when the index adjustment was announced, much of Lucid’s stock performance has already come from investors following its financial and operational progress. Unless that changes, there likely won’t be a catalyst to move Lucid stock higher.

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Howard Smith has positions in Lucid Group. The Motley Fool has positions in and recommends Enphase Energy and Zoom Video Communications. The Motley Fool recommends eBay and recommends the following options: short January 2024 $45 calls on eBay. The Motley Fool has a disclosure policy.