LCID stock could really benefit from Omicron variant
All things considered, the loss that the electric vehicle manufacturer Lucid (NASDAQ:LCID) the actions taken on Black Friday were not too terrible.
As you know, global equity markets have provided their own haircuts, with several big names sparking a lot of ink. But the usual reluctance that accompanies such widespread volatility might not affect LCID stocks in the long run.
Make no mistake, Lucid doesn’t run on magic fuel. After climbing over 91% in the last month and 160% in the last half-year, LCID stock may need to undergo a correction.
But if stocks stumble, it could have less to do with the omicron variant of the novel coronavirus and more to do with general profit-taking motivations.
Certainly, the latest drama of the Covid-19 pandemic should not be ignored. As the Washington post reported, the Dow jones tumbled over 900 points on the day that typically marks the start of the holiday shopping season.
Among analysts, fears have grown that the new strain of the SARS-CoV-2 virus could derail the global economy.
On the surface, that wouldn’t be too hot for the LCID stock or any other automaker, electric or otherwise.
According to the United States Bureau of Transportation Statistics, between February and April 2020, kilometers driven by vehicles resulted in a hemorrhage of 42%. Even at the last reading in August 2021, the metric is down 6% from its pre-pandemic peak.
Unless you’re buying a vehicle just for fun or for showboating, making a new purchase for potentially another low mileage environment doesn’t make sense.
Sure, the premium EVs underlying LCID stocks are aimed at the rich, but the rich usually don’t become rich by making stupid money mistakes.
Still, there’s a chance that omicron will be good for Lucid.
LCID stock is designed for the pandemic
When the Covid-19 pandemic first rocked society, we all learned a lot about the mundane little things we took for granted.
When it comes to combustion cars, I have personally learned that they can be an incredible pain in the back when it comes to maintenance.
Like a human being, you have to circulate the juice in a regular car for it to work properly. If left on too long, the components start to corrode or lose capacity in a surprisingly fast way.
For example, if you leave a car on combustion for a month or two, an incremental parasitic loss could completely drain your battery.
That’s why some auto experts warn that a low-mileage vehicle may not always be the most reliable, especially if it’s used intermittently. In this case, a higher mileage vehicle was used frequently, but well maintained might be the best option.
However, with electric vehicles, you just don’t have this problem, at least not of the same magnitude. An electric vehicle can sit for months without recharging, which will be beneficial if we go into a lockdown to mitigate the omicron variant.
Other countries are taking a proactive stance, locking their borders.
We still don’t know how bad this omicron variant is. However, if our worst fears come true, the US government could potentially take drastic action. If so, that would be a cynical catalyst for the LCID stock.
In addition, electric vehicles have far fewer moving parts than combustion cars. Normally, this makes electric transport more reliable than its combustion counterpart. But in the new normal, this advantage also makes electric vehicles much more livable.
Drivers won’t have to deal with as many maintenance items in electric vehicles as they do with combustion cars, further strengthening the case of LCID stock.
A word of warning
While a return to lockdowns or strong mitigation could help LCID stocks, investors should not bank on them.
Certainly, the omicron variant presents serious concerns for the international community. Yet as the PA noted: “Some previous variants, like the beta variant, were initially of concern to scientists but did not spread very far.”
That’s not to say you should ignore this strain. Obviously, that was enough to scare the markets that there might be something to this possible threat.
Nonetheless, the LCID stock could potentially be sitting on a best of both worlds scenario. If the pandemic worsens, electric vehicles have proven to be the top urban hub. But if the omicron variant turns out to be a false alarm, Lucid could resume his compelling business narrative.
As of publication date, Josh Enomoto did not hold (directly or indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com Publication guidelines.
Former senior business analyst for Sony Electronics, Josh Enomoto has helped negotiate major contracts with Fortune Global 500 companies. Over the past several years, he has provided unique and essential information for the investment markets, as well as for various other sectors, including law, construction management and health.