Lucid Group(NASDAQ: LCID) stock is making big gains Friday. The electric vehicle (EV) company's share price was up 9.6% as of 3 p.m. ET, according to data from S&P Global Market Intelligence.
The EV specialist's stock is gaining ground following comments from Federal Reserve Chairman Jerome Powell suggesting that central banking authority is on track to cut interest rates in September. In addition to being a bullish catalyst for the stock market at large, rate cuts could be an especially positive development for Lucid and other high-risk, high-reward stocks.
Powell sets the stage for a September rate cut
Speaking at the keynote address of a Fed event in Wyoming, Powell confirmed that long-awaited interest rate cuts are now on the near horizon. Citing improved inflation data and signs of weakening in the labor market, Powell stated that the time had come for rate policy to be adjusted. While he didn't make any guarantees, that seemingly sets the stage for the Fed to announce rate cuts with its September meeting.
What comes next for Lucid stock?
Growth stocks and speculative plays tend to perform better in low interest rate environments. Powell's comments have powered a big pop for Lucid, and its share price is now up roughly 1% year to date. Beyond simply increasing appetites for growth stocks and making investors more risk tolerant, rate cuts could have business-specific impacts for the EV player.
Lucid is still posting big losses, and it ended last quarter with roughly $2 billion in long-term debt. If interest rates fall significantly, the company may be able to refinance its debt and reduce its overall interest expenses.
The EV specialist has largely relied on investment from Saudi Arabia's Public Investment Fund (PIF) to finance its operations. The PIF is Lucid's majority stakeholder, and the company's last earnings report arrived with news that it would be providing another injection of investment capital. But selling shares to the PIF has also meant substantial stock dilution for other shareholders. With interest rates seemingly set to fall, Lucid should have more flexible financing options at its disposal.
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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
