It’s not exactly a secret why shares of Gores Guggenheim (NASDAQ:GGPI) have veered off course. But today, is cheaper actually better regarding a GGPI stock purchase?
Let’s kick the tires off and on the price chart of GGPI, then offer a risk-adjusted determination for investors aligned with those findings.
From EVs Tesla (NASDAQ:TSLA) or Lucid Motors (NASDAQ:LCID) to battery charging plays or next-gen technologies like ChargePoint (NYSE:CHPT) or QuantumScape (NYSE:QS), electric vehicle stocks of all types and sizes have been bearishly sideswiped in recent weeks.
And there among EV casualties is blank check outfit Gores Guggenheim whose GGPI shares are set to merge with Swedish EV manufacturer Polestar in the first quarter.
Long gone are the jumping for Joe days of the U.S. administration’s infrastructure plan and proposed $7.5 billion EV charging plan which helped drive many EV stocks aggressively higher this past fall into early winter.
Today, soured growth stock sentiment tied to interest rate fears, Covid-induced chip supply worries impacting the EV industry and maybe a belief nesting and watching Netflix (NASDAQ:NFLX) rather than taking to the open road have conspired to weigh on GGPI and its peers.
Is Now the Time for GGPI Stock?
Yet with GGPI stock falling 25% from its mid-November peak on the back of those concerns, is now an appropriate time to “see through” the wreckage and pick up shares at a healthy discount?
Some may see it that way, including InvestorPlace’s Stavros Georgiadis.
Among GGPI’s positive features, back in November Stavros was upbeat on Polestar’s longstanding racing relationship with Volvo, two sleek and muscular Grand Turismo (GT) EVs already in production and Gores Guggenheim’s own prolific deal pedigree.
Also and looking under the hood, a projected EBIT break-even in 2023 on the back of burly sales growth estimated to generate revenues of $18 billion by 2025 was the type of horsepower backing GGPI stock and financials to be upbeat about.
More recently, colleague Mark Hake and another tire-kicking CFA points at GGPI’s potential to climb to about $14.50. However, for that fair value to be realized, there are some “ifs” to contend with.
For one, Mark notes investors will need to raise their value expectations once the deal closes above a current GGPI “see-through” post-merger pricing of $24.89 billion.
So Wall Street basically needs to get happy again? Yup. Or if you want to sound more professional in your outlook, you’re betting on a multiple expansion to occur.
Importantly too and for a CFA to grow confidently more relaxed about GGPI stock, actual financial statements regarding Polestar’s sales claims of $1.6 billion for this past year will need to substantiate the outfit’s titillating investor slide deck presentation.
Weekly Price Chart
Source: Charts by TradingView
There’s always going to be obstacles, whether that’s chip or battery supply issues which some investors are fearing in Polestar or requiring additional clarity from a certain financial statement.
But the thing is information is never perfect or complete. Let’s not fool ourselves. And even if those devilish details did exist, stock prices are a forward-looking mechanism.
Respectfully, waiting for clarity to arrive on a silver platter means that purchase decision will look very different from today’s “fair value” in GGPI or any stock for that matter.
Look no further than TSLA stock and all the bearish critics proved wrong time and time again for princely sums of money over the years. Or appreciate the ability for stock momentum to take on a life of its own.
Technically, the good news on the Gores Guggenheim price chart is today’s buyers are in a solid position to take advantage of a fairly normal corrective cycle just over 30% in depth.
GGPI Stock and a Larger Drawdown
All stocks correct and this particularly bearish phase has worked its way into a tighter congestion pattern centered on the 76% Fibonacci level and confirmed a weekly candlestick bottom in GGPI over Christmas. Nice, right? It is, but I wouldn’t be a buyer just yet either.
At the moment the largest caveat pertaining to a buy of GGPI stock is a higher volume, bearish engulfing and stochastics combination which formed last week.
As much, the observation is stepping to the side to avoid a possible larger drawdown makes sense. But stay ready to buy GGPI as a favorable shift could happen quickly.
If GGPI can regroup and signal a bullish stochastics crossover, then Gores Guggenheim becomes a much better buy in our estimation. Bottom line though, a slightly out-of-the-money, intermediate-term bull call spread rather than purchase of GGPI stock will greatly improve investors’ chances for safer travel.
On the date of publication, Chris Tyler 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.
Chris Tyler is a former floor-based, derivatives market maker on the American and Pacific exchanges. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.