Churchill Capital IV (NYSE:CCIV) has been one of the more active SPACs in 2021. Churchill is bringing Lucid Motors public. Lucid is one of the many electric-vehicle (EV) manufacturers that investors consider an up-and-comer in one of the hottest market sectors. That status initially created elevated expectations for CCIV stock.
As the closing date of the reverse merger nears, investors can expect more volatility from the SPAC. However, the outlook of CCIV stock seemed much better earlier this year. Today analysts are taking a more realistic view of the EV industry. That is something investors should be mindful of as they decide how to deal with the shares.
The EV Everywhere Narrative May Be on Hold
By now, investors have heard the term “EV fatigue.” There are multiple reasons for this fatigue. One is the sheer number of companies that have entered the market with SPACs. By the end of 2020, there were approximately 16 companies that were either part of a SPAC or had already gone public via a SPAC. Many of these companies, including Churchill Capital, are expected to complete their mergers by the end of Q2.
But that only tells part of the story. According to the blog EVadoption, there are at least 27 public companies in the EV ecosystem, which includes companies that are solely focused on autonomous-vehicle technology.
It’s fair to say that some investors are looking for options beyond Tesla (NASDAQ:TSLA). However with so many choices, investors are beginning to mentally separate the companies that are currently delivering vehicles, such as Nio (NYSE:NIO) from pre-revenue companies like Lucid Motors.
And there’s another reason for the EV fatigue. That is, investors are realizing that the payoff for EVs may not be coming as soon as first believed.
After years of behind-the-scenes development, electric vehicles are rapidly shaping up to be a viable alternative to internal combustion vehicles. However, there are still obstacles to widespread EV adoption ,including no standard for batteries and the lack of a nationwide charging infrastructure.
Disposable Dollars Are Going Elsewhere
Another issue for EV adoption in the short-term is that the economy is reopening, as the vaccine rollout continues to ramp up. Many of my friends are currently in Florida or have been there recently. Other people with whom I speak are booking their first airline flights since the pandemic began, and they are planning to fly later this summer.
So pent-up demand is certainly real, and it may in fact be spectacular. And if that’s the case, it may be hard for Lucid Motors to generate tremendous demand for its initial vehicle. That EV, the Lucid Air , will cost around $70,000 after the $7,500 federal EV tax credit. And if that’s not aspirational enough, the “one-percenters” can choose the company’s Dream Air EV that will retail for $160,000.
To be fair, the Lucid Air only requires a deposit of $300. And Lucid is planning to have several models under $40,000 available in three to five years. But that’s a long time from now.
And there’s one more thing that makes me question the outlook of CCIV stock. Specifically, the stock market was once again flooded with discretionary dollars from retail investors who received their stimulus checks, but so far there’s no evidence that EV stocks received a boost from that catalyst.
What Should Investors Do With CCIV Stock?
If you’re buying CCIV stock at its current price, your profits may not come that soon, since the economic reopening is giving investors better ways to spend their money in the short-term. After all, $70,000 can fund several really nice vacations.
While I like Churchill Capital much better at $23 than I did when it was trading at $30 just about a month ago, I could still think of other, more attractive options in the EV sector.
On the date of publication Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Chris Markoch is a freelance financial copywriter who has been covering the market for seven years. He has been writing for Investor Place since 2019.