Lucid Stock Could Actually Benefit from the Omicron Variant thumbnail

Lucid Stock Could Actually Benefit from the Omicron Variant

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All things considered, the loss that electric vehicle manufacturer Lucid (NASDAQ:LCID) stock incurred on Black Friday wasn’t too terrible.

The Lucid Motors (LCID) Plant in Arizona.

Source: Around the World Photos / Shutterstock.com

As you know, the global equity markets provided their own discount, with several top names shedding serious red ink. But the usual hesitation that accompanies such widespread volatility might not affect LCID stock over the long run.

Don’t get me wrong — Lucid isn’t running on some magic fuel. After soaring over 91% in the trailing month and 160% over the trailing half-year period, LCID stock might be due for a correction.

But should shares trip up, it might have less to do with the omicron variant of the novel coronavirus and more to do with general profit-taking motivations.

To be sure, the latest drama of the Covid-19 pandemic is not something to be ignored. As the Washington Post reported, the Dow Jones tumbled more than 900 points on the day that typically marks the start of the winter holiday shopping season.

Among analysts, fears have heightened 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 LCID stock nor any other automotive manufacturer, electric or otherwise.

According to the U.S. Bureau of Transportation Statistics, between February and April of 2020, vehicle miles traveled hemorrhaged a staggering 42%. Even at the latest read of August 2021, the metric is down 6% from its pre-pandemic peak.

Unless you’re buying a vehicle purely for fun or for showboating, making a new purchase against potentially another low-driving-miles environment isn’t sensible.

Sure, the underlying premium EVs of LCID stock cater to the rich, but rich people usually don’t become that way by committing silly money mistakes.

Still, there’s a chance that omicron could be good for Lucid.

LCID Stock Is Built for the Pandemic

When the Covid-19 pandemic first upturned society, all of us learned quite a bit about the little mundane details we took for granted.

As far as combustion cars were concerned, I personally learned that they can be an incredible pain in the hind end when it comes to maintenance.

Like a human being, you need to keep the juices flowing in a regular car for it to operate properly. If it sits around for too long, components start to corrode or shed capacity in a surprisingly rapid manner.

For instance, if you leave a combustion car sitting for a month or two, incremental parasitic loss could drain your battery completely.

That’s why some car experts caution that a low-mileage vehicle might not always be the most reliable, especially if it was used intermittently. In that case, a higher-mileage vehicle was frequently used but well taken care of might be the better option.

However, with EVs, you just don’t have this issue, at least not to the same magnitude. An EV can sit for months without charging, which will be beneficial if we enter a lockdown to mitigate the omicron variant.

Other nations are taking a proactive stance, locking down their borders.

We still don’t know how bad this omicron variant is. However, if our worst fears are realized, the U.S. government could potentially take some drastic measures. If so, that would be a cynical catalyst for LCID stock.

Additionally, EVs feature far fewer moving parts than combustion cars. Ordinarily, this makes electric transportation more reliable than its combustion-based counterpart. But in the new normal, this advantage also makes EVs much more livable.

Drivers won’t have to deal with as many maintenance items in EVs as with combustion cars, further bolstering the case for LCID stock.

A Word of Caution

Although a return to lockdowns or strong mitigation measures might help LCID stock, investors shouldn’t bank on it.

True, the omicron variant presents serious concerns for the international community. Yet as the AP noted, “Some previous variants, like the beta variant, initially concerned scientists but did not spread very far.”

That’s not to say you should ignore this strain. Obviously, it was enough to spook the markets so there might be something to this possible threat.

Nevertheless, LCID stock could potentially be sitting on a best-of-both-worlds scenario. If the pandemic worsens, EVs have proven to be the superior urban platform. But if the omicron variant turns out to be a false alarm, Lucid could resume its compelling business narrative.

On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.