Investor interest in SPAC (special purpose acquisition companies) continues to wane. Especially for EV (electric vehicle) SPAC plays like Churchill Capital IV (NYSE:CCIV) stock. As you likely know, this blank-check company is merging with EV startup Lucid Motors. Lucid may be laying down the foundation to become a profitable high-end electric vehicle maker.
Yet, in the near-term, its big potential may not be enough to keep investors happy.
Previously, I made the case why Churchill stock, soon to be Lucid stock, could be on the verge of a near-term rebound. In hindsight, it’s now clear there’s a low chance of that happening. Putting it simply, there’s not enough hype anymore around EV SPAC stocks to help fuel another bounce-back.
So, does that mean it’s high time to throw in the towel? Yes and no. Shares may have further room to fall. To some, this may mean there’s an opportunity to cash out, and dive back in when it falls to, say, $10 per share. Yet, given that market timing is easier said than done, those still confident in Lucid’s prospects are better off “letting it ride” instead.
Why Strong Prospects Aren’t Enough in the Short-Term for CCIV Stock
Churchill’s stock price has seen wild moves. But, the story behind its merger target, Lucid, hasn’t changed much. The company may have yet to commence production of its flagship Air luxury EV. But, the company has many “ingredients of success” on its side, as I’ve discussed numerous times in my coverage of this SPAC.
What are Lucid’s “ingredients of success?” Its key advantages lie with its management team, its technology and the massive war chest of capital backing it up. With these factors at play, not only could it scale into a profitable luxury EV maker. It could also give the leader in this space, Tesla (NASDAQ:TSLA), a run for its money.
By focusing on the high-end space alone, it may be able to capture a large chunk of Tesla’s legacy market. Given that the established EV company is trying to go mass market, it may be at risk of losing much of its brand cache. Put it all together, and it makes sense why so many were enthusiastic about Lucid, right out of the gate.
Even so, it may not be enough to renew near-term interest in the stock. Before, there were enough bullish investors bidding it up on the headlines alone. But now, possible buyers of the stock are looking at things with a more critical eye. Some may see this as a sign to cash out. Yet, there’s still a case to be made about holding onto your position.
If Shares Are Trending Lower, Why Stay The Course?
Even after sliding considerably, CCIV stock still commands a frothy valuation. Per the merger transaction overview, at today’s prices (around $20.55 per share), post-merger this company has an implied valuation of around $32.8 billion. Considering that its sales aren’t even projected to hit the $1 billion per year mark until 2023, that’s a steep price to pay up front.
Yet, given that it’s 2026 projections call for $5.2 billion in sales, and a stunning $2.85 billion in EBITDA, there may be still room for its valuation to materially expand in the coming years. The problem? It may take time for said expansion to happen.
So, if that’s the case, why stay the course? Wouldn’t it make sense if, you bought in at $25-$30 per share, to realize your losses, and then wait for another pullback (say to $10 per share) to enter a position?
In theory, such a market-timing based move would make sense. But, even as EV SPACs become yesterday’s news, market timing in general is difficult. Instead of risking missing out on a sooner-than-expected recovery, holding it if you already own it, given the high chances this company has of scaling into a highly-profitable EV maker, may remain your best bet.
CCIV Stock Bottom Line: Hold it if You Own It
Investor sentiment for blank-check companies merging with vehicle electrification plays may have seen a dramatic shift. But, it’s done little to help or hurt the long-term potential for Lucid Motors. As it continues to develop into a profitable business, this company, in the years following the merger, could still become worth many times what it trades for today.
The near-term could remain volatile. This makes it tempting to cash out today, and buy it back later. But, with market timing a tough thing to pull off, sitting tight may be the best move for investors already long CCIV stock.
On the date of publication, Thomas Niel did not (either directly or indirectly) hold any positions in the securities mentioned in this article.
Thomas Niel, contributor for InvestorPlace.com, has been writing single-stock analysis for web-based publications since 2016.