Gores Guggenheim (NASDAQ:GGPI) and Swedish electric vehicle (EV) maker Polestar are expected to complete their merger, forming a new company that will trade under the ticker symbol “PSNY” later in 2022. GGPI stock is joining a crowded field of publicly traded EV companies.
But does the market need another EV stock? Investors are already wondering why the initial valuations and hot momentum of companies like Lucid Group (NASDAQ:LCID) and Rivian Automotive (NASDAQ:RIVN) evaporated. However, I consider Polestar to be in a category of its own and deserving of attention now.
Why GGPI Stock Is Worth Watching
Not all EV makers and their shares are the same. I’ve written bearishly on LCID and RIVN stocks, but in my previous article about GGPI stock, I was bullish.
I considered Polestar, a company backed by Volvo (OTCMKTS:VLVLY) and Geely (OTCMKTS:GELYY), a great company with great products. But things have changed in 2022 with Russia’s invasion of Ukraine. Oil prices have skyrocketed, and gasoline prices have reached very high levels. As a result, public opinion is split between those who support EVs as the future of mobility and those who have doubts.
I love the performance, the speed and the emotion of driving a sports car. Polestar is a pure electric performance car brand, and by itself, it will compete in a niche market. This is not a bad thing, as long it aligns with one universal law in business and economics: Demand is greater than the supply of its cars.
When looking at Polestar, it’s important to consider how sales are doing. It’s that simple. Some other crucial factors are the business model, product range and core values of the company.
Polestar’s Business Model
Pure progressive performance is among the top values for Polestar, along with innovation and design to support sustainable mobility. Safety is also on top of its list.
The company claims it is focusing on a holistic approach — that a car should be fun not just in straight lines, but with all bends and twists of any road. It uses the highest quality components from partners in the automotive industry.
Polestar already has two models in production: Polestar 1, an electric performance coupe car, and Polestar 2, a fastback vehicle. In the future, it plans to offer two more models, including its electric roadster concept, the O2.
The company’s focus is on both performance and premium cars. The usage of recycled and sustainable materials is another characteristic of Polestar cars, combined with high technology. And in an era when electric cars may already start to seem boring, the O2 could make a difference and boost sales for this Swedish performance car manufacturer.
The Bottom Line on GGPI Stock
The latest investor presentation from Polestar highlighted a focus on scalability, global expansion, being profitable by 2024 and having an 8% EBIT margin by 2025.
In 2021, the company “met its ‘global sales target of 29,000,’ which represents year-over-year growth exceeding 185%.” This is a lot of traction. Sales are strong and could rise more with new models arriving.
Polestar is doing something very clever that should translate into sales and profits. It addresses the fastest-growing categories in cars with its current and future models.
I remain bullish on Polestar, as the business model sounds solid and the products are great. If sales continue to be strong in 2022, the stock could move higher. Any selloff near the initial SPAC price of $10 per share would be ideal to mitigate risk when the stock will transit to its new form and identity.
On the date of publication, Stavros Georgiadis, CFA 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.
