Solar energy has boomed and become disruptive. This is largely because, in many places, it became a significantly cheaper way to generate electrical power than alternative sources. Arrival, which is set to combine with CIIG Merger Corp. (NASDAQ:CIIC), a special purpose acquisition company (SPAC), by the end of next month, looks poised to benefit from a similar dynamic. As a result, I urge longer-term investors to buy CIIC stock.
A manufacturer of vans and buses, Arrival’s vehicles are reportedly priced similarly to vehicles with conventional internal combustion engines, aka ICE vehicles. Since electricity is much cheaper than gasoline, electric vehicles (EVs) are considerably cheaper to maintain and repair, and governments are subsidizing them, the total cost of owning Arrival’s EVs should be much less expensive than the total cost of owning ICE vehicles.
And despite its low prices, Arrival has said that it is targeting a bottom-line profit in 2023.
Lower-Cost Manufacturing
Arrival says that its EVs cost less than those of its competitors because of its unique manufacturing process. Specifically, after speaking with Arrival President Avinash Rugoobur, Benzinga reported that the automaker uses a “vertical integration business model that relies on in-house components, materials and software to keep costs as low as possible.”
Due to its low costs, Arrival was able to make a deal with UPS (NYSE:UPS) to supply the shipping giant with “10,000 of its electric delivery vans … at a price that is competitive with traditional fossil fuel rivals, but much lower than comparable EVs.”
Multiple Sources of Validation
In addition to the tremendous validation of Arrival and its technology provided by the UPS deal, the company’s bona fides have also been bolstered by its impressive array of investors. Among the heavyweights that have poured money into the automaker are Hyundai (OTCMKTS:HYMTF), BlackRock (NYSE:BLK) and Kia. BlackRock has invested $118 million in the automaker.
What’s more, the only analyst to evaluate Arrival, as of Jan. 19, wrote a glowing report about the company. Scott Group, an analyst at Wolfe, predicted that “Arrival … could be one of the best positioned long-term electrification plays.” As reasons for that upbeat statement, Group cited what he sees as the company’s favorable markets, the fact that its vehicles can compete with ICE automobiles on price and Arrival’s “unique cost advantages.”
Arrival’s share of the van and bus markets should constantly grow, Group believes. If CIIC’s share of both markets reaches 10%, its annual sales can come in at $15 billion to $16 billion, he estimated. The analyst placed a $50 price target and an “outperform” rating on CIIC stock.
Also bullish on Arrival was CNBC’s Jim Cramer. The pundit gave the start-up very high praise in December, saying it “has the best claim to be the son of Tesla.” He recommended that, if the shares fall below $17.50, investors buy them “hand over fist.” CIIC stock is currently changing hands for a little over $28.
A Strong Management Team
Founder and CEO Mike Sverdlov previously launched “a Russian mobile-internet startup sold for $1.5 billion” and served as Russia’s deputy communications minister, Bloomberg reported. Importantly, he will own 75% of Arrival’s stock after the merger, giving him a tremendous incentive to boost the shares.
Serving as president is the former strategy chief for General Motors’ (NYSE:GM) highly successful Cruise autonomous-driving unit, Avinash Rugoobur. Meanwhile Mike Abelson, who was GM’s vice president of EV infrastructure and global strategy, is “head of the automotive business.”
The Bottom Line on CIIC Stock
Arrival looks poised to disrupt the entire EV sector, and its CEO appears to be a true genius who knows how to launch and build high-quality companies.
In light of these points, I recommend that longer-term investors buy CIIC stock.
On the date of publication, Larry Ramer held a long position in CIIG Merger.
Larry Ramer has conducted research and written articles on U.S. stocks for 13 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been GE, solar stocks, and Snap. You can reach him on StockTwits at @larryramer.
