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Here’s Why Lucid Group Stock Jumped in Early Trading Today

What happened

Shares of luxury EV sedan maker Lucid Group (NASDAQ:LCID) have already jumped nearly 20% in 2022 as investors bet on its potential growth prospects. The stock jumped again Wednesday morning, when news surfaced that supported those hopes. Lucid shares surged nearly 5% in early trading on that news. But the excitement wore off and Lucid stock was trading down 0.73% as of 1:09 p.m. ET.

So what 

The stock’s reversal came when investors may have realized that the news wasn’t entirely unexpected. Lucid chairman Andrew Liveris said in an interview Wednesday morning that the company has plans to build a new factory in the kingdom of Saudi Arabia no later than 2026, as reported by Bloomberg.

white Lucid Air electric sedan in driveway of modern house.

Image source: Lucid Group.

At a conference in Riyadh, Liveris specifically stated, “Now that we are successfully producing and selling cars in the U.S., our attention is turning to this factory here.” But that news shouldn’t be a real surprise, and investors who pushed Lucid shares up early likely realized that. 

Now what

Saudi Arabia’s sovereign wealth fund was an early investor in the electric vehicle start-up. A $1 billion investment in 2018 helped supply the capital Lucid needed to get its Arizona manufacturing facility under way. Now it is working on its next expansion phase at that facility. 

But the company has also stated it would be moving outside the U.S. over time. About a year ago, Bloomberg also reported that Lucid was in talks to build a plant in Saudi Arabia. But Liveris, who has served as chairman of Lucid’s board of directors since April 2019, gave more specifics today. He told the news service that current talks on the project involve working out ownership percentages for Lucid and other partners involved. 

The early pop in shares may have been due to the latest news. But Lucid already has a high valuation relative to the early stage of its business. Combine that with the fact that this news shouldn’t have been overly surprising, and the subsequent paring of those early gains also makes sense. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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