Editor’s note: This article was updated on June 10, 2021, to correct the year the Lucid Air is expected to release.
Among the many publicly traded, electric vehicle startups, Lucid Motor appears to be firmly in the middle of the pack. That situation, along with the still-high valuation of Churchill Capital Corp IV (NYSE:CCIV) stock, Lucid’s SPAC, spurs me to continue to recommend that investors avoid CCIV stock.
Without a doubt, there are positive aspects of Lucid and CCIV stock. But I’m not yet convinced that Lucid has the “killer” features, niches, or partnerships to justify the shares’ current elevated valuation.
The Company in the Middle
There are several prominent EV startups that appear to have few if any strong, positive catalysts at this point. I’d put Canoo (NASDAQ:GOEV), Workhorse (NASDAQ:WKHS), Fisker (NYSE:FSR) and Lordstown Motors (NASDAQ:RIDE) in that category.
Conversely, Arrival (NASDAQ:ARVL), Ayro (NASDAQ:AYRO), ElectraMechannica (NASDAQ:SOLO) and Xpeng (NYSE:XPEV) all have compelling upbeat drivers. I’ve written about all of the latter companies in the past.
But in a nutshell, Arrival has created very low-cost EV trucks and has a huge, blossoming partnership with UPS (NYSE:UPS). Ayro and ElectraMechannica have entered compelling, fairly uncompetitive niches, while Ayro also has strong partnerships, and there’s evidence that ElectraMechannica has a huge number of orders, while many businesses are interested in its Solo EV.
Finally, Xpeng has developed an advanced semi-autonomous driving system, while becoming a big hit in China.
Currently in a sort of no-man’s land between the two categories is Lucid. The EV maker has some positive catalysts, including the investment in it by Saudi Arabia, its strong leadership team (InvestorPlace Senior Investment Analyst Luke Lango provided a great deal of information about the latter point recently), and the high range of its EVs.
What’s more, after seeing a “pre-production” version of the car, at least one reviewer was very enthusiastic about Lucid’s upcoming Lucid Air EV. Specifically, InsideEVs wrote that the Lucid Air appears to be “really luxurious, high quality, well put together, and offers outstanding acceleration, that stands out even among the quickest EVs on the market.”
Yet, as I’ll describe in the next section, the company will have to contend with a ton of competition in the luxury EV space. Meanwhile, the “above 9,000” pre-orders it received, while somewhat impressive, aren’t really high enough to justify its SPAC’s valuation. And, as I noted earlier, I haven’t seen the EV maker launch any features or partnerships that have really put it towards the front of the pack.
A partnership with Apple (NASDAQ:AAPL) would have been a game-changing alliance for Lucid, so the decline of CCIV stock after Lucid failed to announce a rumored deal with the tech giant at an important event made sense to me.
There are already many players in the luxury EV space in which the Lucid Air will compete. And Lucid will have to contend with many more competitors as its first EV hits the market later this year.
BMW (OTCMTKS:BMWYY) is offering EVs and plug-in hybrids. In addition to BMW, Mercedes-Benz, Audi, Jaguar, Ford (NYSE:F), Tesla (NASDAQ:TSLA), and Toyota (NYSE:TM) (via its Lexus brand) all have EVs in the “Top 10 best luxury electric cars 2021” list compiled by Autocar.
Most of these companies have very well-established brands and huge ad budgets.
And Lucid lacks two of the key positive catalysts that made Tesla so successful. Specifically, Lucid is not a first mover in EVs and its CEO has not received the tremendous amount of attention garnered by Tesla CEO Elon Musk.
The Bottom Line on CCIV Stock
The combination of the middle of the pack in terms of positive catalysts and an elevated valuation is not very attractive or promising.
Therefore, I continue to recommend that investors sell CCIV stock.
On the date of publication, Larry Ramer held long positions in Ayro, Arrival, ElectraMechannica, and GM. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Larry Ramer has conducted research and written articles on U.S. stocks for 14 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, Ford, Exxon, and Snap. You can reach him on StockTwits at @larryramer.