It has been a tough year for risk assets. And electric vehicle (EV) stocks have been among the most challenging propositions for investors. But it’s time to put some of those concerns in the rearview mirror with Gores Guggenheim (NASDAQ:GGPI) stock.
Tesla (NASDAQ:TSLA). Nio (NYSE:NIO). Lucid Motors (NASDAQ:LCID). As top pureplay EV manufacturers they’re paving the way to a greener, less-carbon intensive future. And with gas prices through the roof in 2022, buying those stocks might seem like an easy road to investment riches. Yet year-to-date losses of 32% to nearly 50% point to a different reality.
But Gores Guggenheim’s Swedish EV manufacturer Polestar has only suffered minor comparative damage of just 16%. There are also indicators that GGPI stock is ready to deliver profitable outperformance to buyers.
GGPI Stock Looks Good Under the Hood
Covid-19 and Russian-tied supply chain issues. Inflation. At-risk consumer spending. There’s little doubt each factor has weighed on the EV market and the group’s dismal shareholder performance. Yet GGPI stock’s upstart Polestar has been navigating those obstacles like a champ this year.
After all, the Volvo (OTCMKTS:VLVLY) and Geely (OTCMKTS:GELYF) backed electric vehicle manufacturer’s Polestar 1 and 2 have been popular, critical hits with consumers in 19 international markets spanning Europe, China, Australia and the U.S.
But don’t take my word that GGPI stock and Polestar are the real deal, just look under the hood. Most recently GGPI revealed burly quarterly deliveries of 13,600 Polestar vehicles. That’s nearly half of all of 2021’s 29,000 EVs delivered in just three months. And mind you, last year’s take grew by 185% over 2020’s vehicle sales.
To be fair, GGPI did recently reduce this year’s full-year delivery guidance from 65,000 to 50,000 vehicles. The reason? Prolonged lockdowns in China in 2022 negatively impacting its production.
Still, having proven extremely consistent in delivering on its forecasts through the pandemic, Polestar’s longer-term assurance it remains on track to sell 290,000 EVs in 2025 on the back of five models deserves the benefit of the doubt.
Hit the Gas Pedal On Gores Guggenheim
Source: Charts by TradingView
To walk the aisle with GGPI stock’s bears, there are potential future hazards like Ukraine’s lithium supply or ongoing Covid-related manufacturing headwinds. But that’s hardly an isolated issue for Polestar.
GGPI is now offered at a very reasonable price worth investors consideration. Based on this past year’s $1.4 billion in revenue and $20 billion implied deal valuation, GGPI stock’s Polestar fetches just 14 times sales. And in 2022, even after cutting its forecast, that figure should conservatively shrink to less than 9 times sales.
Also, Gores Guggenheim is currently offering buyers other attractive features. For example, GGPI is trading at its $10 net asset value (NAV) as it forms a bullish double bottom formation.
Take the Driver’s Seat in GGPI Stock
There’s no such thing as a perfect investment. But if investors want overall attractive exposure to the electric vehicle market, purchasing GGPI stock makes sense. With Polestar’s SPAC deal expected to go through this month and given today’s NAV pricing, using a modified collar is favorable.
One combination that looks interesting is a GGPI stock purchase coupled with a long July $10/$7.5 bear put spread and a short July $12.5 call. The spread can be executed for a small debit and minimize downside exposure to as low as $7.50 to just a few percent versus 25% in shares into expiration.
On the upside, if Wall Street has a change of tune and Polestar shares begin to motor higher, a starting price of about $10.45 for the slightly unorthodox spread maxes out at $12.50 for a return of nearly 20% in just over a month’s time. And with the chance to make future adjustments to even larger profits, this looks like a great way to accessorize a GGPI stock purchase.
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.