After an extended period of consolidation, Lucid (NASDAQ:LCID) stock has surged strongly in the last month. During this period, the stock has nearly doubled.

Unlike the rally prior to the company’s merger with its SPAC , the recent gains have not been based on speculation. However, it would make sense to wait for the shares to fall before considering buying them.

Let’s discuss the positives and the potential risks of LCID stock. Overall, I consider Lucid to be a good long-term investment.

Since Lucid is in the early stages of growth, it makes sense to talk about its cash. As of Q3, the company reported cash and equivalents of $4.8 billion. As a result, it should be able to make some near-term investments.

However, between 2022 and 2024, Lucid expects negative free cash flow of approximately $7.3 billion. It might be realistic to assume that its cash outflow could be higher, since its current projections are based on very optimistic vehicle delivery estimates.

So it’s very likely that Lucid Motors will require liquidity infusions of more than $5 billion over the next few years. The stock’s recent gains will give the company good opportunities to raise funds by selling more of its  shares. That’s one reason to be cautious after the stock’s big rally.

Is Intensifying Competition a Threat?

A recent Bloomberg article indicates that there are “more than 500 models of EVs and fuel cell vehicles available for sale today.” Six years ago, the number was less than 100.

Besides pure-play electric-vehicle firms, traditional automobile companies have also joined the EV race. The competition in the sector will continue to intensify in the coming years.

However, there are two reasons to believe that rising competition is not a threat to Lucid Motors.

First, Lucid Motors focuses on innovation. That’s the differentiating factor between companies that will perish or survive.

In September 2021, Lucid Air received an official EPA rating of 520 miles of range. As a result, the Air has the longest range of any electric vehicle ever rated by the EPA. In the coming years, Lucid is likely to grow by staying ahead of its competitors.

Furthermore, the company’s initial model is a luxury car. However,  a few years from now, Lucid Motors intends to manufacture a car for the mass market. Earlier this year, Lucid CEO Peter Rawlinson revealed that “six well-known automakers have reached out to him over the last month and expressed interest in Lucid Motors’ technology.” Lucid intends to co-operate with other companies to build a $25,000 electric car in the next few years. Such an EV could be a game-changer for Lucid’s sales volume and market share.

Additionally, it’s worth noting that the global EV market is expected to grow at a compound annual growth rate of 29% through 2030. Considering the sector’s growth trajectory, multiple EV players can survive and create value.

Of course, the industry will consolidate in the coming years. However, Lucid is likely to be among the companies that’s positioned to acquire other firms and grow.

The Bottom Line on LCID Stock

As of November 2021, 17,000 models of Lucid’s first EVs have already been reserved. This translates into a revenue backlog of $1.3 billion. The initial response to the EV has been encouragingm and that’s one of the reasons LCID stock has been trending higher.

Lucid also has a marketing team that’s spread across United States, Canada, Europe and the Middle-East. There is a big addressable market for its EVs. and once mass production of them begins, its delivery volumes are likely to be robust.

In terms of manufacturing capabilities, Lucid already can produce 34,000 EVs each year. Its production capacity will increase to 90,000 vehicles annually, including a number of SUVs.

However, in the long-term, the company will need more funding or further capacity expansions. Any new stock sales are likely to take the shares lower. However, I would consider any decline in LCID stock as a good opportunity to accumulate it.

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

Faisal Humayun is a senior research analyst with 12 years of industry experience in the field of credit research, equity research and financial modelling. Faisal has authored over 1,500 stock specific articles with focus on the technology, energy and commodities sector.