Shares of the electric vehicle (EV) maker Lucid Group (NASDAQ:LCID) have underperformed the broader market year-to-date. However, hedge funds, popular for generating above-average returns, are optimistic about this penny stock (learn more about penny stocks here). Using TipRanks’ Hedge Fund Trading Activity tool (which analyzes data from Form 13-Fs to offer hedge fund signals), we found that these experts have significantly accumulated Lucid stock.
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Hedge Funds Bought Lucid Stock
The high interest rates have weighed on EV demand. Further, heightened competition and a price war have taken a toll on the profitability of EV manufacturers, including Lucid. Nevertheless, Lucid’s deliveries have outpaced production in the past two consecutive quarters, which is encouraging and shows an improving inventory position.
Lucid produced 2,110 vehicles and delivered 2,394 units in Q2. Further, Lucid’s cost optimization initiatives are helping the company enhance its gross margin.
Given these developments, the Hedge Fund Confidence Signal is Very Positive for LCID stock based on the activity of five hedge funds. Hedge funds increased their LCID holdings by 3.2M shares in the last quarter. Coatue Management’s Philippe Laffont started a new position in LCID stock. Meanwhile, Joel Greenblatt of Gotham Asset Management and Drew Phillips of Fortitude Family Office increased their holdings.
Is Lucid a Buy, Sell, or Hold?
Lucid stock is down about 25% year-to-date. The near-term demand weakness across the EV sector and increased price competition pose challenges and keep analysts sidelined.
Robert W. Baird analyst Ben Kallo reiterated a Hold on Lucid stock on July 8. The analyst appreciated the company’s solid Q2 deliveries, which outpaced production for the second consecutive quarter. However, the lack of profitability keeps Kallo sidelined on LCID stock.
Including Kallo, six analysts cover Lucid stock, and all recommend a Hold. Analysts’ average price target on LCID stock is $3.22, which implies a limited upside potential of 1.9% from current levels.
Bottom Line
Lucid stock has underperformed this year, but hedge funds capitalized on this pullback and increased their holdings. However, analysts maintain a “Hold” rating on LCID stock due to ongoing profitability challenges and weak EV demand.
These mixed data points suggest that investors should consider multiple factors when making investments. Investors can use TipRanks’ penny stock screener to find other attractive investment opportunities.
