Read The Full Article On: Investorplace
Lucid Motors could be a trillion-dollar company by 2040, so buying CCIV stock today could be like buying TSLA stock in 2017
By Luke Lango, InvestorPlace Senior Investment Analyst Feb 23, 2021, 8:10 am EST
There is one company in the world that has what it takes to rival Tesla(NASDAQ:TSLA) in the multi-trillion-dollar global electric vehicle revolution. That company — U.S.-based luxury EV maker Lucid Motors — just confirmed that it will be going public through a merger with blank-check company Churchill Capital Corp IV(NYSE:CCIV). Yet, on confirmation of that merger, CCIV stock plunged.
Source: Jarretera / Shutterstock.com
This plunge in CCIV stock is a golden buying opportunity, for three big reasons:
- Merger execution risks surrounding CCIV stock have been eliminated. We now know that the value of CCIV stock is backed by the fundamental earnings power of Lucid Motors.
- Operationally, Lucid Motors is where Tesla was 10 years ago — and has all the right ingredients and necessary firepower to turn into a major force in the global EV market soon.
- Given the company’s long-term earnings growth potential, Lucid Motors is worth about $100 billion today. That implies a fair price for CCIV stock of over $60. Long-term, shares could soar to $400 — representing 10X upside potential from the CCIV stock price today.
So, forget these “buy the rumor, sell the news” dynamics. Instead, zoom out, focus on the big picture, and buy (and hold) Lucid Motors stock for the long haul.
CCIV Stock: Buy the Rumor, Sell the News
First, let’s talk about how Lucid Motors got here.
There have been murmur for weeks that Lucid Motors would go public via a merger with blank-check company Churchill Capital Corp IV. On those rumors, CCIV stock soared rapidly. From $10 to nearly $70 in a matter of weeks.
Those rumors were confirmed yesterday. Lucid Motors said in a press release that it will, indeed, go public through a merger with Churchill Capital.
But CCIV stock sunk on the news – probably because the merger valued the company at $25 billion, while the CCIV stock price at the time was valuing Lucid Motors at about 4X that, or around $100 billion.
To that extent, the immediate, gut-reaction sell off in Lucid Motors stock makes sense.
But, the fundamentals here imply that Lucid Motors is actually worth more than $100 billion today, even though the company hasn’t sold a single car yet. Here’s why.
Everything It Takes to Be the Next Tesla
Zooming out, Lucid Motors has everything it takes — and, importantly, is the only company that has everything it takes — to be the “next Tesla.” This, of course, implies big things ahead for CCIV stock.
I’m not exaggerating when I say: “Lucid Motors has it all.”
The EV maker has the talent. The company is led by Peter Rawlinson, the former Chief Engineer of the Tesla Model S.
Supporting him is an impressive team of former Tesla, Audi, Apple (NASDAQ:AAPL), Samsung, Ford (NYSE:F), Intel (NASDAQ:INTC) and General Motors(NYSE:GM) executives.
This is the most impressive confluence of talent in the EV industry outside of Tesla – and it’s not even close. Relative to Tesla, Lucid Motor’s management team stacks up equally (outside of Elon Musk, of course, which – admittedly – is a big difference).
Lucid Motors also has the resources. Following the closing of the SPAC merger, Lucid Motors is expected to have $4.5 billion plus existing cash on its balance sheet to fund its operations for the next several years. Again, this cash balance is unrivaled in the EV space by everyone except Tesla.
Lucid also has the branding and sales strategy to rival Tesla.
The company is positioning itself as a so-called “post-luxury” brand that focuses on elegance and modernity over the traditional legacy focus-points of opulence and indulgence.
Lucid designed its car with this post-luxury vibe in mind. Earthy tones. Sustainable materials. Simple controls. Connected ecosystem. End-to-end customer experience. Tech forward. Peaceful ambience … These are attributes consumers place a high value on today – and Lucid Motors knocks all of them out of the park.
It’s the dream car.
Lucid is selling this dream car through a 100% direct sales strategy, which encompasses selling cars online (through a modern, simple, fully-customizable, and straightforward digital sales process) and through Lucid-branded stores that look like luxury fashion showrooms.
In so doing, Lucid retains full control over the customer experience, and build and retain strong brand equity — much as Tesla has done with its direct sales model.
The Big Technology Edge
Most important to CCIV stock’s long-term success, Lucid Motors has some of the best and most protected technology in the EV industry.
Over the past 10 years, Lucid has developed, tested, and fine-tuned an entirely in-house, state-of-the-art electric drivetrain platform called the Lucid Electric Advanced Platform (LEAP).
LEAP comprises some key competitive technological advantages including:
- A low-floor, wide-base “skateboard” EV platform that enables the company’s ultra-spacious “Space Concept” interior design;
- An incredibly power dense drive unit that yields the most efficient battery in the EV industry with 4.5 miles / kWh (versus ~4 miles / kWh for Tesla Model S), and therefore unlocks farther driving ranges without compromising on performance;
- An onboard boost-charge technology dubbed “Wunderbox” that enables ultra-fast charge rates and bi-directional power delivery that includes vehicle to grid and vehicle to vehicle charging.
Those are some major technological advantages inherent to LEAP. These advantages won’t disappear anytime soon. LEAP is backed by 403 patents – over 80% of which are already issued — so Lucid Motors should be able to adequately defend its EV technology lead for the foreseeable future, especially when you consider this company has more talent and resources than anyone else in the space save Tesla.
Strong Product, Big Demand & Huge Production, Too
Of course, Lucid Motors has manifested its strong technology into a great first product.
Lucid’s first car – the Lucid Air Dream, which will debut in the second half of 2021 – is an amazing car. It looks the part of luxury dream EV. It has all the technology and self-driving bells-and-whistles. And, perhaps most importantly, it features a best-in-class driving range of over 500 miles and industry-leading recharge time of 20 minutes for 300 miles.
This great first product from Lucid Motors has strong demand. Consumers are responding to the unrivaled specs and unique post-luxury branding by pre-ordering the car in bulk. As of February 2021, the company had received over 7,500 reservations that represent ~$650 million in potential sales.
Remember, that’s before the company has even delivered a product…
Of course, for many pre-production EV companies, mass production is a huge execution risk. After all, it is not easy to make hundreds of thousands of cars in a single year.
But Lucid Motors already has robust production capacity in place. The company has built the first state-of-the-art, greenfield EV manufacturing facility in North America, in its Advanced Manufacturing Plant (AMP-1) in Casa Grande, Arizona. That plant is expected to produce around 365,000 Lucid cars per year at full capacity.
All of these facts provide strong signal that CCIV stock is a big-time winner.
A Bold Vision to Drive Long-Term Growth
One thing I really like about Lucid Motors — and by extension now, CCIV stock — is that this management team has vision.
Much like Tesla, Lucid Motors won’t stop at making a superstar luxury EV. Indeed, Lucid Motors appears committed to following the Tesla playbook step-by-step to turn into a multi-vertical energy disruptor.
That is, the company intends to launch a premium sportscar first (like the Model S), then a premium SUV (like the Model X), and then leverage strong brand equity, superior in-house technology, and economies of scale to start producing more affordable EVs down the road (like the Model 3).
Beyond that, Lucid hopes to leverage its ultra-dense proprietary battery technology to make energy storage solutions, too – much as Tesla is doing right now with its Powerwall platform.
In other words, Lucid Motors may be a company that hasn’t sold an EV today — but by 2030, this will be a company that is selling hundreds of thousands of vehicles to consumers all across the globe, at all price points, while also installing onsite energy storage solutions, too.
Is Lucid Motors the Next Trillion-Dollar Company?
I think I covered all the bases there… and, by now, you should see the writing on the wall.
Lucid Air is a mini-Tesla, with all the right ingredients to one day potentially rival Tesla not just for global EV market supremacy, but for global clean energy market supremacy, too.
Yet, at the current CCIV stock price, Lucid Motors is just a $60 billion company. Tesla is a $700 billion company.
Could CCIV stock soar to a valuation that makes Lucid Motors worth $700 billion?
Yes.
My numbers say that — assuming EVs take over the world, Lucid Motors nabs 8% global EV market share, nets average selling prices of about $40,000, and scales to 30% auto gross margins with ~20% operating margins – this will one day be a $600 billion company, even without the energy storage business.
Throw in the energy storage business, and you’re easily talking a $700+ BILLION company. If the energy storage business gains serious traction, then Lucid Motors could one day be a trillion-dollar company.
CCIV Stock Is Worth $70 Today
To be clear, these projections are many, many years into the future. Specifically, I don’t see Lucid Motors being worth $600+ billion until 2040.
Some of you may laugh that I have a 20-year model on Lucid Motors. But Lucid is where Tesla was 10 years ago. And 10 years ago, the only way to accurately value TSLA stock was through employing a 20-year model out to 2030.
Thus, I think the only appropriate way to value CCIV stock today is by using a 20-year model out to 2040, since Lucid Motors will still be in hypergrowth mode throughout most of the 2030s.
Now, because my price target for CCIV stock is basically 20 years out, we have to discount it back. Discounting it back by 10% per year, my numbers say that CCIV stock is worth about $70 today.
That’s where I expected shares to trend in the medium-term once the dust settles.
Bottom Line on CCIV Stock & Lucid Motors
Lucid Motors represents one of the most innovative companies in the world today, with enormous long-term growth potential. To that end, CCIV stock is a great long-term buy.
But it’s not the best growth stock to buy today.
Instead, the best growth stock to buy today is a company that reminds me of a young Amazon (NASDAQ:AMZN). Indeed, I think buying this stock today could be like buying AMZN stock back in 1997 — before it soared thousands of percent.
Which stock am I talking about?