GOEV - Churchill Capital IV Has Fallen Enough to Make It Worth Buying at These Levels
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There is still no official date for when Churchill Capital IV (NYSE:CCIV) stock will undergo its reverse merger with Lucid Motors.
In any case, the reverse merger eventually will be consummated and LCID stock will begin trading. Investors wonder if now is the time to purchase as shares are trading much lower than a few months ago.
I would say that there is a strong argument for investing in CCIV stock right now. Lucid is an EV company far ahead of special purpose acquisition company (SPAC) EV competitors, the price is right currently, and the company’s focused product offering is logical.
When the EV bubble burst earlier this year, even leading companies like Tesla (NASDAQ:TSLA) with tangible products and sales history lost a significant amount of market capitalization. SPAC EVs lost even more as the market accounted for their speculative nature and unproven business models.
In the case of companies like Hyliion (NYSE:HYLN) and Canoo (NASDAQ:GOEV) the discounting was justified. Both exemplify what happens when investors clamor to get in on the next ‘it’ market without bothering to do much due diligence about the individual companies therein.
However, I’d argue that Lucid Motors and CCIV stock were unfairly punished as markets swung in the other direction. And that’s why now is a good time to establish a position.
Investors may approach CCIV stock with some hesitancy because shares have dropped from $57 back in late February, to a little more than $22 today, but the company is doing much more than its aforementioned SPAC EV brethren.
In December Lucid completed construction of its initial EV factory in Casa Grande, Az. The factory has a production capacity of 30,000 vehicles annually but recent projections suggest Lucid Motors might produce roughly 7,000 vehicles this year.
Of course, starting an EV company and producing actual vehicles is a tremendously complex and difficult task. However, the point is that Lucid Motors looks to be the wheat amongst the SPAC EV chaff.
Valuation Suggests Lucid Makes Sense Now
A recent article by InvestorPlace’s Mark Hake suggested that CCIV stock has significant upside value based on his modeling. I’d suggest anyone who’s currently on the fence regarding Lucid Motors/CCIV to take a look at his detailed article outlining his valuation model.
His calculations suggested that on a purely quantitative basis Lucid Motors should trade between $19.49 and $35.41 at present. Given that shares trade at $22 now, there’s a good deal of upside remaining.
He later adjusted his estimates and suggested that his prior valuation was too rich given how much could go wrong for the company. I believe that CCIV stock will continue sideways and then it will rise once a merger date is announced. That is the typical pattern SPACs follow. CCIV should be no different.
That also raises the point that a sell-off may ensue as investors take some profits off the table, which I assume will happen. However, I think that Lucid’s future offerings are truly appealing and have a great chance to lead to a successful company long-term.
Product Line Logic
Lucid Air is squarely aimed at chipping away Tesla’s dominance in the upscale EV sedan market.
Most of the specs belonging to the Lucid Air lineup are fairly comparable to those of the Tesla S model. So assuming Lucid Motors can bring a quality product to market, it will have a good chance to erode some of Tesla’s S model dominance over its market niche.
It’ll largely be a matter of taste. Personally, I like the look of the Lucid Air and I’m sure I’m not alone. It’s a sleek vehicle.
Lucid Motors will also be offering an SUV scheduled to be arriving in 2023. Project Gravity will culminate in a 7-seat luxury SUV. The vehicle should garner lots of demand based on early information.
The point here is that Lucid Motors is going to produce vehicles with mass appeal and significant markets. Again, other SPAC EVs arguably do not.
Takeaway
CCIV stock is a speculative bet on EVs that makes more sense than much of the competition. The company is real, the price is right, and the vehicle lineup, logical.
On the date of publication, Alex Sirois 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.
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