In the recent NASDAQ correction, it didn’t take time for Churchill Capital Corp. IV (NYSE:CCIV) stock to correct from nearly $65 to lows around $20. CCIV stock did bounce back strongly from the intra-day lows of March 5 and currently trades around $29.
These days, anything related to electric vehicles seems exciting. However, I believe that there will be a better entry point into CCIV stock. At a current valuation of $47 billion, the stock still looks expensive as compared to peers.
Of course, the company’s market positioning seems attractive and there is a big addressable market over the next decade. But first, let’s talk about valuations.
There is an interesting excel document presented by FT Alphaville that provides real-time updates on EV stock valuations.
The compilation shows that Tesla (NASDAQ:TSLA) is currently trading at 10.4 times EV/FY2022 sales. Nio (NYSE:NIO) trades at 8.6 times EV/FY2022 sales.
However, CCIV stock is trading at 19.1 times EV/2022 sales.
Clearly, the stock seems overvalued as compared to peers. In general, Tesla commands a valuation premium over other EV stocks. CCIV valuation seems a bit stretched. I won’t be surprised if the merged entity witnesses some more correction.
CCIV Stock and Lucid Motors Long-Term Chances
Even at current valuations, investors remain bullish on electric vehicle stocks. The key reason is the projected growth over the next decade. Therefore, be it Tesla, Nio or Lucid Motors, the basis of the bull story is EV sales being at an inflection point.
Let me talk about two estimates.
Bloomberg projects that EV sales will increase from 1.7 million units in fiscal year 2020 to 26.0 million units in FY2030. And further to 54 million units by FY2040. Deloitte expects 11.2 million EV sales in FY2025 and 31.1 million units by FY2030.
Any factor that negatively impacts these estimates will result in a re-assessment of the bull story and a downward adjustment to valuations. For now, the multi-year tailwind seems intact.
Lucid Motors seems well-positioned to benefit from the increasing adoption of EVs. The company is positioning itself as a provider of luxury electric vehicles. The company’s first model, Lucid Air Dream Edition, priced at $169,000, has already been fully reserved.
Lucid differentiates itself from Tesla in terms of battery efficiency. Lucid Air is expected to have a range of 517 miles as compared to 412 miles for Tesla Model S.
Coming back to the pricing, Lucid Pure is priced at $69,900. Its Touring and Grand Touring are priced at $87,500 and $131,500 respectively. The base price is attractive considering the company’s positioning in the luxury market.
In terms of the revenue outlook, the company expects to generate revenue of $2.2 billion in FY2022. Revenue is expected at $5.5 billion in FY2023. A key reason for the expected revenue surge is Project Gravity. This will be the company’s first luxury SUV.
Lucid Motors expects revenue of $22.7 billion in revenue by FY2026. However, it might be too early to talk about projections beyond the next two years.
Concluding Views
Lucid Motors believes that the global luxury vehicle market will reach $733.2 billion by FY2026. Considering the trend, there will be a gradual shift from conventional luxury vehicles to luxury EVs. The company stands to benefit considering the big addressable market.
It’s also worth noting that this past December, the company completed the construction of its first factory. The factory will have an initial capacity of 30,000 units. With planned expansion phases, capacity is likely to increase to 400,000 units.
Lucid Motors has guided for delivery of 251,000 EVs in FY2026. The expansion is likely to be spread over the next five years. The key point is that the company will have ample liquidity buffer after the business combination is closed. Lucid is also guided for positive free cash flows by FY2025.
Overall, Lucid Motors looks attractive and it seems like the company will have a brand-pull than a brand-push. Something that’s similar to Tesla. However, amidst these positives, CCIV stock still looks expensive as compared to peers.
Therefore, it makes sense to wait for some correction before fresh exposure. I won’t be surprised if CCIV stock trades in the $20 to $25 range.
On the date of publication, Faisal Humayun did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.
Faisal Humayun is a senior research analyst with 12 years of industry experience in the field of credit research, equity research and financial modeling. Faisal has authored over 1,500 stock specific articles with focus on the technology, energy and commodities sector.
