Will Lucid Motors (LCID) Avoid the ‘Post-Merger Blues’ of Other SPACs?
CCIV and Lucid Motors are two weeks away from their proposed merger. What's Lucid's stock forecast, and will it rise or fall after the merger?
July 9 2021, Published 8:26 a.m. ET
Churchill Capital IV (CCIV) and Lucid Motors are two weeks away from completing their proposed merger. What's Lucid's stock forecast, and will it rise or fall after the merger?
Lucid is set to start trading on the Nasdaq on Jul. 23 under the ticker symbol “LCID”. CCIV shareholders are expected to vote on the merger on Jul. 22. The EV (electric vehicle) startup's public debut has been highly anticipated by investors, as many see Lucid as a rival to EV market leader Tesla.
Why have SPACs fallen after the merger?
Lucid investors should be aware that most companies that have gone public recently via reverse mergers have seen their stock fall after their business combination. 23andMe (ME), Beachbody (BODY), and SoFi Technologies (SOFI) are all trading lower, some even at a discount to their $10 IPO price.
There's also been a sell-off in high-growth stocks, including green energy, space exploration, and fintech companies. Many SPACs combined with loss-making companies that have all of their profit skewed toward the future.
Lucid’s stock forecast after the merger
Investors will likely compare Lucid with other EV companies after the merger, and following its listing, Lucid stock may move in tandem with other EV stocks. While EV stocks have crashed in 2021, they have a long-term growth story.
Currently, Lucid has a pro forma market capitalization of around $40 billion. Based on its projected 2025 sales of $14 billion, its 2025 price-to-sales multiple is around 3x. In comparison, Tesla has a market capitalization of $628.9 billion and is expected to post revenue of $49.2 billion in 2021, which implies a 2021 price-to-sales multiple of 13x. From a valuation perspective, Lucid may be a good long-term bet despite its expensive next-12-month numbers.
What catalysts could trigger a rise in Lucid stock?
A key catalyst that could drive Lucid stock higher is preorder data showing demand and reservations. The company has reported that there are now 10,000 pre-orders for its flagship Lucid Air sedan. The company had roughly 7,500 reservations for the Air when its SPAC deal was announced.
The Lucid Air is set to be assembled in the second half of 2021. The company plans to deliver 577 vehicles in 2021, 20,000 in 2022, 49,000 in 2023, and 90,000 in 2024.
What could cause Lucid stock to crash?
Lucid stock could crash amid an EV market sell-off. Concerns over China and the DiDi Global IPO drama hurt CCIV along with several other EV stocks, including NIO, Xpeng, and Li Auto. Lucid stock could also fall if its luxury sedan deliveries are delayed.
Will Lucid Motors stock rise or fall after the merger?
In my view, we're done with the sell-off, and Lucid stock will recover after the merger. Currently, CCIV is 62 percent below its 52-week high but has recovered from its lows. News of the merger vote date helped the stock. In the medium to long term, the stock should trade on Lucid’s fundamentals, which appear to be strong. CCIV stock was up 2 percent in premarket trading on Jul. 9.
