Pulling back some since the start of July, is Churchill Capital IV (NYSE:CCIV) stock ready to break out once again? It’s possible. Investors are again turning their attention to this special purpose acquisition company (SPAC), which went on a roller coaster ride earlier this year following its rumored, then announced, plans to merge with electric vehicle startup Lucid Motors.
The deal close is fast approaching. As InvestorPlace’s Brenden Rearick reported, Lucid is hosting a presentation on today, ahead of the deal vote.
Depending on what’s discussed in this presentation, it may be enough to spike enthusiasm for Churchill shares once again.
So, should you take this as a reason to buy in today at nearly $27 per share, with the hopes of flipping it at a higher price? Looking at a similarly buzzed-about blank-check company that recently “deSPACed,” don’t count on this strategy being an easy way to fast profits.
As for its longer-term prospects, while Lucid may have the potential to become the next Tesla (NASDAQ:TSLA), it’s already priced that way. Not only that, facing competition from not just Tesla, but incumbent brands as well, there’s still a big chance it falls short of expectations.
As shares remain pricey ahead of the deal close, the best move may be to hold off for now.
CCIV Stock May Fail to Pop
Investors keen on Churchill Capital IV, soon to be Lucid stock, are bullish for many reasons. Some investors are in it to flip it. That is, they’ve bought in since May, following its sell-off, in anticipation of it popping once its headline-making transaction closes.
Others are in it with a much longer time horizon in mind. They see now as the time to “get in on the ground floor,” before it becomes a “Tesla killer,” and its value grows to the size of the current reigning luxury EV champion. Both are possible outcomes, I just don’t think they’re likely ones.
Before breaking down the flaws in the long-term bull case, let’s deconstruct the first possible scenario: CCIV stock pops after it deSPACs, and becomes LCID stock.
Sure, prior SPAC stocks took off like rockets during the “Robinhood stock” and “Reddit stock” trends of 2020 and 2021, respectively. But a more recent similar situation points to more disappointing results.
Take last month’s deSPACing of SoFi Technologies (NASDAQ:SOFI) for example. With its deal close happening sooner than anticipated, even I saw it having potential to trend higher in the short-term.
Yet, despite popping ahead of the June 1 transaction close, its deSPACing rally soon lost momentum. Since then it slid back to where it changed hands before this short-lived run-up. That is not to say Churchill/Lucid shares will fail to pop post-deal close, however it’s not an encouraging sign.
Lucid Still Looks Pricey
Based on how the market’s trending now, it’s questionable whether a short-term pop is possible for CCIV stock. It’s questionable as well whether the more long-term scenario happens, either.
Many believe that once this startup’s vehicles start rolling off the assembly line and begin to give Tesla a run for its money, its share price will rise tremendously over time.
Yet, it’s questionable whether shares can even bounce back to their all-time highs of $64.86 let alone soar to even higher price levels in the coming years.
To justify its current valuation today, it has its work cut out for it. Basically, it needs to go from zero sales to more than 250,000 annual deliveries, within the next five years. Strong reservation numbers may help make the case the demand will be there to sell a quarter-million vehicles per year, but as InvestorPlace’s Joanna Makris pointed out, reservations do not equal sales.
Issue two (high competition) relates well to issue one (the valuation dilemma).
Lucid’s not only competing with Tesla for the luxury EV market. It has names like Daimler (OTCMKTS:DMLRY) and BMW (OTCMKTS:BMWYY) to contend with as well. Making up for lost time, their respective strong brand equity and legacy infrastructure could give both an edge against early-stage names like this one.
Hold Off for Now
I’ll admit that the buzz around Lucid is more than just hype. It has plenty in its corner that point to it taking on the competition that’s heating up in the luxury EV space.
The issue, though, is that the price isn’t right above $26 per share. Give CCIV stock another look if it pulls back after its upcoming deSPACing. For now? Hold off buying.
On the date of publication, Thomas Niel 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.
Thomas Niel, a contributor for InvestorPlace.com, has been writing single-stock analysis for web-based publications since 2016.