Churchill Capital Corp IV (NYSE:CCIV) stock is revving back up. Churchill has been a perfect example of the special purpose acquisition company (SPAC) boom and bust this year.
CCIV stock exploded from $10 to $65 in a single month this past winter. It did so on excitement around Churchill’s announced deal to merge with electric vehicle (EV) maker Lucid Motors. Investors were excited for Lucid in particular. And any promising EV stock was going straight up back then.
Then, the EV euphoria quickly downshifted. And Churchill’s stock went especially sour. That’s because the $65 stock price didn’t have much fundamental support. Indeed, to that point, Churchill/Lucid raised additional funds for the business at $15 per share even when people were paying several times that on the open market for CCIV stock. As the valuation for Lucid became clearer, CCIV stock rapidly plunged from $60 back to below the $20 mark.
Now, though, Lucid is back on the upswing. Shares are up 30% in recent weeks. It’s not just Churchill either, a bunch of other EV stocks are finally showing signs of recovery. Here’s how the trade is going.
Tesla Is Out, Other EV Companies Are In
Much of the market is being driven by sentiment and trader emotions rather than fundamentals right now. As such, changes in the popular opinion are causing big moves in share prices.
This leads us to Tesla (NASDAQ:TSLA) and Elon Musk. Musk has generated a great deal of negative feeling over the past few months. This is due to his moves in the cryptocurrency arena. For awhile Tesla was buying up Bitcoin (CCC:BTC-USD) directly on its balance sheet and was accepting Bitcoin for vehicle purchases. Musk abruptly reversed this course, however, as he blasted Bitcoin for its negative impact on the environment. He also led to controversy when suggesting that Bitcoin should form a miner’s council.
This led to a huge backlash against Musk. A cryptocurrency with a vulgar name involving Musk became a meme. Other crypto investors rushed to slam Musk and reassure Bitcoin investors. At the same time, TSLA stock began to underperform badly. Tesla stock is down sharply since April and currently sits near its lowest point of 2021. A lot of Tesla stock owners are also huge crypto proponents, so it’s not surprising that TSLA stock has skidded since Musk went rogue on Bitcoin.
Meanwhile, as Tesla has slumped, the other EV stocks are soaring. Part of this seems linked to the return of meme and WallStreetBets stocks. A bunch of heavily shorted EV names such as Lordstown (NASDAQ:RIDE) and Canoo (NASDAQ:GOEV) have risen 50% in recent weeks. This enthusiasm has spread into CCIV stock as well. Adding to the momentum, Tesla recently canceled its Plaid+ vehicle. That’s a direct blow to TSLA stock, while helping rivals such as Lucid that are making a play for the same market.
Heading Higher Into the Lucid Merger
When I last covered CCIV stock, I highlighted how investor backlash against SPACs had created a buying opportunity for Churchill/Lucid. Shares have rallied around 30% since then.
Regardless, the broader argument still holds. Anyone that wanted to sell CCIV stock probably already did so during its painful decline from $65 to $17. People that stuck with Lucid through that are in it for the long haul. Now sentiment is swinging in the right direction. Especially with Tesla losing steam on multiple fronts, it creates an open lane for Lucid. This rally could pick up as Lucid is about to complete its merger with Churchill and switch to its new ticker symbol.
CCIV Stock Verdict
Will Lucid’s electric vehicles take the market by storm? We still don’t know. It will take Lucid several years to get its production and marketing fully up to speed. Investors in Lucid should be patient, as it will take a few quarters to see how the road map is progressing.
That said, clearly, CCIV stock isn’t following the company’s fundamental trajectory at the moment. Shares went much too high in February, and bottomed out last month. Now, shares are back on the upswing.
As long as EV stocks remain a momentum trade, it’s important to know which way the tide is going. For now, Tesla is heading downward, and the rival EV companies are recovering. Thus, it makes sense to keep riding Lucid as a trade, at least up until it completes its official merger and switches to its new ticker symbol. At that point, assuming there is a pop, locking in some trading profits could be the right decision.
On the date of publication, Ian Bezek did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Ian Bezek has written more than 1,000 articles for InvestorPlace.com and Seeking Alpha. He also worked as a Junior Analyst for Kerrisdale Capital, a $300 million New York City-based hedge fund. You can reach him on Twitter at @irbezek.