Lucid Group has seen its stock price collapse this year, with shares down 67% year-to-date and 82% over the past twelve months. The company's market capitalization now stands at just $1.36 billion. While the downtrend may continue, the elevated short interest could trigger a short squeeze, offering a potential upside surprise for traders.
Short Interest Climbs to 23%
The Saudi Arabia-backed electric vehicle maker has faced intense selling pressure. Rumors have circulated about possible bankruptcy or going private, though management has stated it has enough liquidity to fund operations into next year. The company also clarified that AlixPartners, its restructuring consultant, is assisting with operational improvements.
Meanwhile, Saudi Arabia's own financial challenges have raised concerns. Houthi attacks on oil infrastructure and shipping lanes have escalated, leading the kingdom to cancel a major investment conference. Additionally, setbacks like the LIV Golf investment and the scaled-down The Line project have strained Saudi finances. Investors worry the kingdom may reduce its support for Lucid, a loss-making venture.
These factors have pushed short interest to 23%, the highest among American EV companies. While this reflects bearish sentiment, it also creates conditions for a short squeeze if the stock rallies unexpectedly.
Revenue Growth Overshadowed by Losses
Lucid's revenue is growing, but losses remain substantial. In the second quarter, revenue rose to over $405 million from $259 million a year earlier. Half-year revenue reached $687 million, up from $494 million. However, the company reported a net loss of $1.03 billion in the last quarter, nearly double the $536 million loss in Q2 of the prior year.
Given the persistent losses, Lucid will likely need to raise additional capital. Management expects cash to run out next year, and with Saudi Arabia potentially less willing to invest, the company may resort to share issuance, which could further dilute existing shareholders.
Technical Outlook Points Lower, But Squeeze Risk Looms
The daily chart shows a prolonged sell-off, with the stock recently dropping from a high of $8.50 on July 28 to the current $3.38. The price remains below the key support level of $4.46, its June low, and below all major moving averages. The path of least resistance is downward, with the next target at $2.50.
However, the risk for short sellers is that a short squeeze could push the stock back to as high as $5. This potential for a sharp reversal makes the stock a high-risk, high-reward proposition.
This article is for informational purposes only and does not constitute financial advice.
