When I last wrote about Churchill Capital IV (NYSE:CCIV), I said “not to hold it with diamond hands,” but now may be the time to take a position since then CCIV stock has sold off much more quickly than anticipated.
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As you likely know, the SPAC (special purpose acquisition company) stock skyrocketed as rumors circulated of its planned merger with EV maker Lucid Motors.
Living up the adage, “buy the rumor, sell the news,” investors quickly dropped it like a hot potato post-announcement. For those who got in too late, it’s been painful. Those who bought in before the rumors circulated, or hopped on as this became a “meme stock,” however, are likely still sitting on big gains.
Some in this boat may be mulling an exit. Others who didn’t buy this while it was trending up may be skittish about buying the pullback. While still richly priced, those who bought it earlier may want to hold it, and those who haven’t bought it yet may want to buy in now.
Taking a second look after my more bearish stance, I now understand why so many see this company giving Tesla (NASDAQ:TSLA) a run for its money. This justifies its premium to the other “aspiring Teslas” out there. It also justifies my suggestion to seize the opportunity, and buy the pullback.
Wall Street participated in its record run-up from January through mid-February, but it was retail investors that fueled this SPAC’s “to the moon” rally. Bullish on buying what we could be the “next Tesla,” at the ground floor, many saw what looked like a can’t-miss opportunity.
Yet, while responsible for the CCIV stock rally, retail investors were behind the big sell-off as well. How? Some may have bought this for the long-haul. But, many others saw this as a quick trade. As I said above, “buy the rumor, sell the news.”
That’s clear from the stock’s performance following confirmation of the merger. On that day alone (Feb. 23), shares fell a staggering 38.6%. The sell-off continued on Feb. 24, with the stock falling back below the $30 per share price level.
As of this writing, shares have stabilized, and are trending higher, at around $27 per share. Some may still not be convinced this remains a potential future winner. However, with so much more going for it than with other “aspiring Tesla” stocks, that remains the case.
Investors have a lot of options when it comes to selecting EV SPAC stocks to buy. Churchill Capital IV, soon to be Lucid, isn’t the only upstart that could “disrupt” Tesla’s market share in luxury EVs.
Names like Fisker (NYSE:FSR) have a shot at this as well. Diving into the details, though, it’s no contest which one is the better horse to bet on.
Actually, scratch out “better horse,” and put in “better jockey.” That is to say, with an executive team that includes Tesla alums such as Peter Rawlinson, Lucid has the right team at the helm.
More than that, as InvestorPlace Senior Investment Analyst Luke Lango detailed Feb. 23, Lucid has “all the right ingredients” in place to soon become a “major force in the global EV market.”
Besides the right executive team, Lucid has the proprietary technology that could give it a clear edge, not just against the established EV makers, but against incumbent automakers entering the space as well.
To top it all off, with $4.4 billion in its coffers, Lucid has more than enough capital to turn its ambitions into reality.
In short, there’s enough in play to make this the rare “meme stock” that lives up to its hype. This points to the stock not only recovering from its recent losses. But, heading to even higher price levels in the coming years.
After falling as of late, the future of electric vehicle stocks is unclear. Future trends remain on this sector’s side. But, an EV stock crash could still be around the corner.
Yet, there may be enough in play to send this richly-priced sector even higher. Further “green” actions by the Biden administration may compel investors to resume their “buy the rumor, buy more on the news” mentality they displayed extensively in 2020.
Such an outcome would bode well for names like Tesla and Nio (NYSE:NIO), which now sell for as much as 27% below their all-time highs.
However, compared to the other plays out there, consider CCIV stock the best bet on continued EV stock enthusiasm. As more news comes out of Lucid, shares could not only recover their losses but surge toward new all-time highs.
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, a contributor to InvestorPlace, has written single stock analysis since 2016.
The post After Investors Sold the News, Consider Churchill Capital IV Stock a Buy appeared first on InvestorPlace.
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