The rally out of the pandemic fueled retail investors’ love for special purpose acquisition companies (or SPACs). Sadly, most of them have felt the sting of the $10 curse, and crashed harshly to realistic levels. But with the graveyard full of single-digit stocks, it’s easier to find the best SPACs.
Blank-check companies inspired retail traders to chase, so they bought without doing their due diligence. So today we point out opportunities that exist in the SPAC rubble. This time we take our time and really analyze the companies’ future prospects, not just chase a theme without proof.
Also it is important to take into account that the markets in general are still teetering on the verge of another dip lower. The next two weeks are critical, especially from the technical perspective. The charts suggest that the indices have support, but if we break below the recent weekly closing values, sellers could press the issue even harder.
I am optimistic that we should avert that nasty bearish scenario. And for now I would entertain the idea of nibbling on a few long-term opportunities. But by no means would I engage fully regardless of how great the opportunity may seem.
Now that they are out of favor, I can focus on finding the best SPACs to own going forward. And here are the ones I am looking at right now.
My main complaints about even the best SPACs last year was the lack of fundamentals. Now LCID stock has semblance of a foundation in the making, and more to come soon enough.
I do fear temporary setbacks if they announce more delays. Though at least they will have a plausible cover story thanks to the many current global shortages. Even incumbents like Tesla (NASDAQ:TSLA), General Motors (NYSE:GM) and Ford (NYSE:F) are struggling with it. Therefore, for the short term, I can rely on the chart technicals to embolden the bulls a bit.
The indices are under fire from the bears, but LCID stock has managed to build a small base. Since the middle of May, it has established a higher-low trend that the bulls can build upon. Next comes the tall task of tackling the resistance above — and there’s plenty of it. There will be efforts to stifle the rally going into $22 per share. Luckily and according to Tradytics, there are also large dark pools of money ready to pounce below $18 per share.
Gambling is usually good business, but you can’t guess that from the action in DraftKings (NASDAQ:DKNG) stock. It’s been pretty much straight down since March of 2021, when the party ended for even the best SPACs. From the highs to the lows DKNG stock lost 85% of its value — but it, too, is trying to stabilize.
When a stock has poor fundamentals, then it becomes difficult for the bulls to defend it.
When a stock is too new, it doesn’t usually receive enough benefit of the doubt. Especially when Wall Street has lost its courage, as it has now after the quantitative easing ended. The war that the U.S. Federal Reserve is waging on inflation ruined risk appetite, and the bulls have not maintained a winning streak long enough to break out of the descent.
DKNG, like LCID, is trying its best now, and it has a chance. The most recent bottom for DraftKings happened in early May. Since then, they’ve established a streak that will soon face a challenge. Short term, the battle will be between $16 and $10 per share.
If the bulls can build more constructive momentum, I am confident that it will do well. My concern is only temporary and from the overall malaise.
SoFi (NASDAQ:SOFI) stock may be down because most people don’t understand the business model. According to Yahoo Finance, it has a thriving financial statement in the works. Management has grown revenue four times in four years, so it has potential.
Recently there are rumblings of loan loss provisions, but that’s the whole sector’s problem.
If markets don’t collapse and if the Fed doesn’t go nuclear with the hikes, SOFI stock will have a chance to shine. All it needs is a bit more time to deliver these consistent results for a bit longer. Then the experts will have more courage to cover it and add to their enthusiasm about its future.
Currently and according to TipRanks, SOFI stock had 11 experts covering it in June and an average of a buy rating on it. Their average price target is almost 50% above its current levels.
If the stock doesn’t improve, they might have to revise their targets lower. That would cause a short-term dip in the stock, but one that would be an opportunity.
I currently engaged long with it via options, so I can have a leverage effect with its moves. I have had decent luck with it for now, but I am not all in with one batch. These are turbulent times so we can’t be too confident.
If the CBOE Volatility Index (VIX) is 45% higher than its average then the market makers are nervous. And if they are nervous then we should be too.
On the date of publication, Nicolas Chahine held a bullish position in SOFI. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.