A few weeks ago, it seemed as if “meme mania” for Lucid Group (NASDAQ:LCID) was returning for an encore. As I discussed in my last article on LCID stock, thanks to an unconfirmed buyout rumor, shares in this electric vehicle (or EV) maker made a “to the moon” move, to as much as $17.81 per share.

Flash forward to now. Lucid has pulled back, but still trades above pre-rumor prices. There’s little indication Lucid’s majority shareholder, Saudi Arabia’s Public Investment Fund, or PIF, is going to make an offer to buy out the company. Even so, some may believe that the stock could sustain its current valuation.

However, nothing could be further from the truth. With buyout rumors now the rearview mirror, Lucid’s many issues, including a new concern, are once again top of mind. Put simply, that’s bad news for anyone holding it today.

LCID Stock: Why It’s Best to Cut Your Losses Now

There’s one big takeaway when it comes to the aforementioned “mania” surrounding a possible buyout of Lucid Group: buying stocks on takeover rumors alone can be hazardous to the health of your portfolio. Investors who held the stock prior to this development had the opportunity to “sell the rumor,” and take profits.

But for investors who “bought the rumor” with LCID stock, this hasn’t been the case. Most of these investors are now underwater on their positions. Worse yet, these investors could end up even deeper underwater, if they decide not to accept defeat, and cut their losses today.

Lucid may be currently holding steady, creating the illusion that $10 per share is now the stock’s new floor. Unfortunately, there’s still plenty out there that could not only sink LCID back to its 52-week low ($6.09 per share) but send it to new lows as well.

Lucid’s longstanding issues, such as production delays, high cash burn, and rising competition remain an issue. Plus, there’s a new concern that may be emerging: this premium EV maker’s announced plans to lower vehicle prices.

Price Cuts Won’t Work for Lucid

As you likely know, EV price cuts are now all the rage across the industry. Since Tesla’s (NASDAQ:TSLA) initiation of them in January, incumbent automaker Ford (NYSE:F) has responded with price cuts for one of its EVs (the Mustang Mach-E).

With this, Lucid has hopped on the price-cut bandwagon too. The company is now offering a $7,500 “credit” (a rebate, really) on some of its Air Touring and Air Grand Touring models.

The jury’s still out on whether price cuts are a smart move for Tesla and Ford. One can argue that the boosting of demand caused by lower prices could outweigh concerns such as the effect on margins. Their respective price cuts could also enable more of their EVs to qualify for the “real” $7,500 credit (the new U.S. federal EV tax credit).

Lucid’s price cut plan, however, there’s no debate: this move is a big negative for LCID stock. Not only will slightly decreasing the price of its fancier offerings (these models sport six-figure sticker prices) do much to spur demand.

If followed up with additional price cuts, this latest move from the company could have a severe impact on its fiscal performance.

Bottom Line

Sell-side forecasts call for Lucid Group to continue to report around $2.3 billion ($1.26 per share) in losses, as it attempts to increase annual deliveries from a few thousand last year, to around 24,000 in 2023.

But if the company institutes further price-cutting to meet this delivery target, or if, despite the additional cuts, fails to meet this target, losses may be far greater than currently-expected.

In the event Lucid misses on deliveries, or reported higher losses, shares will undoubtedly sell off on the news. Higher-than-expected losses could also necessitate the need to raise more capital, on terms dilutive to existing shareholders.

If this all plays out, shares could end up back in the stock market junkyard, languishing at penny stock levels. Given this high downside risk, there’s only one wise move to make with LCID stock: sell/avoid.

LCID stock earns a D rating in Portfolio Grader.

On the date of publication, Louis Navellier had a long position in F. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article.

The InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.