Lucid Motors (LCID) is going public in a SPAC merger with Churchill Capital Corp IV (CCIV) valuing it at $24 billion. The merger date should be here soon. Will CCIV stock go up before the Lucid merger date, and is it a good buy now?
CCIV stock has gained 10 percent over the last five trading days and is looking to recover some of its losses. Lucid hasn’t delivered a single electric vehicle yet, with its first production models anticipated to reach customers in the second half of 2021. If the company succeeds, it might be worth hundreds of billions of dollars.
What's happening with CCIV stock?
CCIV stock has been rising amid merger progress. The stock recaptured the $20 mark on May 20. The stock gained 4 percent after Lucid Motors provided the proposed merger deal visibility in public. Investors liked the news that the luxury electric vehicle maker plans to list its stock on Nasdaq under the ticker symbol “LCID.”
On the mere possibility of a merger deal with Lucid, CCIV shares rose sixfold from its IPO price of $10 per share. However, the euphoria faded as investors sold speculative high-growth stocks with soaring valuations in favor of value stocks. After falling about 69 percent from its peak, CCIV stock is stable at around $18–$20 per share.
CCIV will likely go up before Lucid merge
I think that we're done with the sell-off and CCIV stock is expected to go up before the Lucid merger date. The stock gained 10 percent over the last five trading days and was up in pre-market trading on May 21.
Catalysts that could drive CCIV stock
There are several catalysts that could drive CCIV stock higher. First, the stock could rise on a merger voting date announcement. Social Capital Hedosophia Holdings V (IPOE) stock also surged 10 percent after the SPAC announced the date of the shareholder vote. Chamath Palihapitiya's IPOE is set to take fintech startup SoFi public. Second, the investor sentiment could get a lift. The EV company will likely reveal the Lucid Air user experience on May 26. More visibility is always preferable than less with these pre-revenue companies.
The investor sentiment can shift back to growth stocks since bond yields have fallen over the last few weeks. The stocks could also get a boost because investors are bottom fishing and value buying beaten-down quality growth stocks. CCIV stock has largely been moving in tandem with other electric vehicle stocks like Tesla. This means that CCIV stock will rise with positive investor sentiment in Tesla stock.
CCIV stock is a good buy at these prices.
At CCIV’s current stock price, Lucid is valued at around $31.7 billion. Based on the projected 2021 sales of $97 million, we get a 2021 price-to-sales multiple of around 326.8x. The company’s 2022 and 2025 price-to-sales multiples are 14.3x and 2.3x, respectively.
Peers Xpeng Motors (XPEV) and NIO (NIO) have market capitalizations of $23.1 billion and $56.3 billion, respectively, and 2021 price-to-sales multiples of 10x and 10.5x, respectively. Tesla has a market capitalization of $565.3 billion and a 2021 price-to-sales multiple of 11.5x.
Could CCIV stock fall after the merger?
After the merger deal closes, CCIV would automatically convert into Lucid. The stock isn’t expected to fall after the merger because of the company's strong growth outlook. Lucid projects sales of $2.2 billion in 2022, $5.5 billion in 2023, and $14 billion in 2025. The company plans to sell 20,000 units in 2022 and 135,000 units in 2025.
Lucid is also set to benefit from President Biden’s policies for the electric vehicle market. While EV stocks have been out of favor with markets, they are a long-term growth story.