For investors in Lucid Motors, the company going public via a reverse SPAC merger with Churchill Capital (CCIV), sentiment finally starts to be shifting in a bullish way in favor of investors.
Indeed, the stock chart for CCIV stock has been on quite the tear of late. Investors who bought CCIV stock near the bottom in mid-May have booked gains of more than 35% at the time of writing.
Of course, this recent move is a reversal of an otherwise bearish medium-term trend. Since hitting a high of nearly $65 earlier this year, shares have declined to the $26 level today. That’s about a 60% decline from its peak, creating a lot of pain for those who bought near the top.
Now, whether this near-term bullish momentum can continue is a whole other discussion. Let’s dive into what factors have pushed CCIV stock lower of late, and what could get this EV upstart continued momentum to the upside. (See Churchill Capital IV News Sentiment on TipRanks)
Investors Running Out of Patience in Today’s Market
Investors seeking quick wins in today’s speculative options-fueled meme stock market have done well with Lucid/Churchill in the earlier run-up in SPAC valuations we saw take place last year and into January/February of this year.
However, in recent months, the premium investors were willing to pay for SPACs has declined considerably. This downside pressure in the SPAC market has also coincided with a range of factors that have been bearish for growth stocks. Rising inflation concerns have fueled a rise in bond yields. This is inherently bearish for any company with a higher-than-average valuation.
Additionally, a global chip shortage has been cause for concern among investors banking on continuous production and revenue growth beats in the near-term. For EV stocks broadly, this has been perhaps the biggest catalyst providing selling pressure of late.
On top of these macroeconomic concerns, Lucid Motors’ highly-anticipated IPO doesn’t yet have an announced date. This has been a sticking point for investors looking to get this show on the road. The company has said it wants to go public closer to the release date of its flagship vehicle, the Lucid Air. That’s expected to be some time in the second half of this year. For impatient investors, it appears some capital is flowing to other companies currently in production.
Additionally, rising competition in the EV space continues to spread EV investors’ money over a wider range of stocks today. Other competitors simply have better valuations, from a historical fundamentals-oriented perspective. Accordingly, higher-risk/speculative EV plays have taken a back seat, so to speak, compared to larger competitors making the shift toward electric vehicles.
Indeed, those are quite a few bearish catalysts. However, there’s room to be optimistic on Lucid and other pre-revenue peers. Here are a few of the key catalysts that have provided near-term momentum for this stock.
Bullish Factors Driving CCIV Stock Higher Recently
For starters, inflation concerns appear to have tapered of late. The yield on the 10-year U.S. Treasury has declined considerably from its 14-month high seen earlier in April. Inflation is largely being viewed as transitory, and growth stocks are getting a boost.
Additionally, recent high-profile reports suggesting the Amazon (AMZN)-backed electric truck maker Rivian could be going public soon at a considerable valuation ($50-$70 billion) has stoked the idea that maybe Lucid/Churchill isn’t overpriced at all.
Indeed, if other upstarts can fetch this sort of valuation, it’s feasible to think that Lucid’s valuation around $6 billion at the time of writing is a steal. Everything’s relative, particularly in this market.
Additionally, Lucid’s recent user experience reveal with its flagship Lucid Air model has stoked a lot of attention for this luxury EV player. Indeed, the Lucid Air looks great. The features included with the Lucid Air, and the overall intuitive design incorporated in this vehicle, makes this a vehicle which will likely garner significant orders up-front.
Accordingly, Lucid appears well-positioned to tackle the high-end EV segment when it enters production later this year. Whether investors will be patient with this stock from here remains to be seen. However, there’s reason to believe this stock is one with a lot of upside potential today.
Stock Investor Sentiment
Based on the activity of 423,536 investors in the recent quarter, investor sentiment about Lucid is very negative. 2.6% of all investor portfolios on TipRanks hold CCIV stock.
Lucid Motors may indeed be one of those speculative plays that’s worth throwing some money at right now.
That said, it remains increasingly difficult to value these pre-revenue EV plays in the context of a broader market that can’t make up its mind about growth stocks.
For those seeking an aggressive speculative pick, CCIV stock may fit that profile. For those more conservative long-term investor types, sitting on the sidelines may make more sense with this name. More volatility is likely to materialize over the near-term, with CCIV stock and its peers, if these various risk factors continue to be repriced as they have been in recent months.
Disclosure: Chris MacDonald held no position in any of the stocks mentioned in this article at the time of publication.
Disclaimer: The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities.