For investors in Lucid Motors, the company going public via a reverse SPAC merger with Churchill Capital (CCIV), sentiment finally starts to be shifting in a bullish way in favor of investors.
Indeed, the stock chart for CCIV stock has been on quite the tear of late. Investors who bought CCIV stock near the bottom in mid-May have booked gains of more than 35% at the time of writing.
Of course, this recent move is a reversal of an otherwise bearish medium-term trend. Since hitting a high of nearly $65 earlier this year, shares have declined to the $26 level today. That’s about a 60% decline from its peak, creating a lot of pain for those who bought near the top.
Now, whether this near-term bullish momentum can continue is a whole other discussion. Let’s dive into what factors have pushed CCIV stock lower of late, and what could get this EV upstart continued momentum to the upside. (See Churchill Capital IV News Sentiment on TipRanks)
Investors Running Out of Patience in Today’s Market
Investors seeking quick wins in today’s speculative options-fueled meme stock market have done well with Lucid/Churchill in the earlier run-up in SPAC valuations we saw take place last year and into January/February of this year.
However, in recent months, the premium investors were willing to pay for SPACs has declined considerably. This downside pressure in the SPAC market has also coincided with a range of factors that have been bearish for growth stocks. Rising inflation concerns have fueled a rise in bond yields. This is inherently bearish for any company with a higher-than-average valuation.
Additionally, a global chip shortage has been cause for concern among investors banking on continuous production and revenue growth beats in the near-term. For EV stocks broadly, this has been perhaps the biggest catalyst providing selling pressure of late.
On top of these macroeconomic concerns, Lucid Motors’ highly-anticipated IPO doesn’t yet have an announced date. This has been a sticking point for investors looking to get this show on the road. The company has said it wants to go public closer to the release date of its flagship vehicle, the Lucid Air. That’s expected to be some time in the second half of this year. For impatient investors, it appears some capital is flowing to other companies currently in production.
Additionally, rising competition in the EV space continues to spread EV investors’ money over a wider range of stocks today. Other competitors simply have better valuations, from a historical fundamentals-oriented perspective. Accordingly, higher-risk/speculative EV plays have taken a back seat, so to speak, compared to larger competitors making the shift toward electric vehicles.
Indeed, those are quite a few bearish catalysts. However, there’s room to be optimistic on Lucid and other pre-revenue peers. Here are a few of the key catalysts that have provided near-term momentum for this stock.
Bullish Factors Driving CCIV Stock Higher Recently
For starters, inflation concerns appear to have tapered of late. The yield on the 10-year U.S. Treasury has declined considerably from its 14-month high seen earlier in April. Inflation is largely being viewed as transitory, and growth stocks are getting a boost.
Additionally, recent high-profile reports suggesting the Amazon (AMZN)-backed electric truck maker Rivian could be going public soon at a considerable valuation ($50-$70 billion) has stoked the idea that maybe Lucid/Churchill isn’t overpriced at all.
Indeed, if other upstarts can fetch this sort of valuation, it’s feasible to think that Lucid’s valuation around $6 billion at the time of writing is a steal. Everything’s relative, particularly in this market.
Additionally, Lucid’s recent user experience reveal with its flagship Lucid Air model has stoked a lot of attention for this luxury EV player. Indeed, the Lucid Air looks great. The features included with the Lucid Air, and the overall intuitive design incorporated in this vehicle, makes this a vehicle which will likely garner significant orders up-front.
Accordingly, Lucid appears well-positioned to tackle the high-end EV segment when it enters production later this year. Whether investors will be patient with this stock from here remains to be seen. However, there’s reason to believe this stock is one with a lot of upside potential today.
Stock Investor Sentiment
Based on the activity of 423,536 investors in the recent quarter, investor sentiment about Lucid is very negative. 2.6% of all investor portfolios on TipRanks hold CCIV stock.
Bottom Line
Lucid Motors may indeed be one of those speculative plays that’s worth throwing some money at right now.
That said, it remains increasingly difficult to value these pre-revenue EV plays in the context of a broader market that can’t make up its mind about growth stocks.
For those seeking an aggressive speculative pick, CCIV stock may fit that profile. For those more conservative long-term investor types, sitting on the sidelines may make more sense with this name. More volatility is likely to materialize over the near-term, with CCIV stock and its peers, if these various risk factors continue to be repriced as they have been in recent months.
Disclosure: Chris MacDonald held no position in any of the stocks mentioned in this article at the time of publication.
Disclaimer: The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities.
Amazon (AMZN) has launched a new pharmacy service that lets customers order a six-month supply of prescription drugs starting from $6, according to a Reuters report. However, the company has restricted access to the service to customers with prescriptions from their healthcare providers.
Customers can order supplies of medications for common diseases such as diabetes and blood pressure.
Prime members would be eligible for extra savings for drug payments not covered by insurance. Amazon will offer free two-day delivery under its prescription drugs supply program.
Citing the Insider, Reuters reported that Amazon is considering opening physical pharmacies as well in the U.S. (See Amazon stock analysis on TipRanks)
Morgan Stanley analyst Brian Nowak reiterated a Buy rating with a price target of $4,500 on Amazon stock. Nowak’s price target implies 37.86% upside potential.
The analyst believes Amazon could soon launch an expanded same-day shipping service. Same-day delivery, the analyst believes, will raise consumer expectations and better address the on-demand market worth nearly $1.7 trillion.
"These categories make up ~65% of the remaining offline core US consumer expenditure and will drive ~40% of forward US e-commerce growth," noted Nowak.
Consensus among analysts is a Strong Buy based on 31 Buys. AMZN's average analyst price target of $4,295.17 implies 31.59% upside potential to current levels.
According to TipRanks’ Hedge Fund Trading Activity tool, confidence in AMZN is currently Very Positive. The cumulative change in holdings across the 56 funds that were active in the last quarter was an increase of 660,500 shares.
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It may not be the beginning of the end for Netflix (NFLX) stock. Still, as the content subscription service’s big media and big tech rivals bulk up, the streaming leader now faces additional challenges.
As is well-known, recent headline-making deals in streaming have included the proposed merger of AT&T’s (T) WarnerMedia unit into Discovery Inc. (DISCA), as well as Amazon’s (AMZN) recently-announced purchase of film studio MGM.
This development adds to the ground big media has gained when it comes to its own streaming services. ViacomCBS’s (VIAC) Paramount+, as well of WarnerMedia’s HBOMax are some recent examples. Put them together, and they may start to have a dramatic effect on Netflix’s growth potential, both in the U.S. and in its overseas markets. (See Netflix stock analysis on TipRanks)
So, what could this do to stock price performance going forward? Even with these headwinds, international growth may still be on the table. This could help shares, trading for around $492 per share today, to hold steady. Yet, if this “grow into its valuation” catalyst fails to fully play out, the above-mentioned pressures could weigh down further on shares.
NFLX Stock and The Impact of Big Media Consolidation
How will the recent media deals affect Netflix shares going forward? Sure, as some have pointed out, the Amazon-MGM tie up may do little to affect the streaming space. Even after the still-pending WarnerMedia-Discovery merger closes, this platform will remain at the top of the streaming heap.
For now, Netflix’s ubiquitous service remains the leader by subscriptions worldwide (204 million). With Amazon’s Prime Video (150 million) the second largest, big media’s various streaming platforms are still far behind, with Disney’s (DIS) Disney+ the only one coming close to hitting 100 million.
Nonetheless, even as it remains the streaming leader, this doesn’t guarantee it will not impact its underlying growth, as well as the future growth of the NFLX stock price, going forward. As the company’s pandemic tailwinds (which helped materially boost results in 2020) fade, the platform’s growth both in the U.S. and overseas is slowing down.
Based on sell-side projections of 2022, growth may still be at a level that allows Netflix to hold onto its current valuation. However, if the recent deal-making and rival streaming services launches result in its actual results falling short, this richly-priced stock could be at risk of pulling back.
Slowing Growth May Mean Valuation Contraction
Right now, even with the potential risks mentioned above, high growth remains on the menu for NFLX stock going into 2022. Sell-side estimates call for the company’s revenue to grow around 15%, and its earnings to grow around 23.2%, next year.
If it lives up to these estimates, it may be sufficient to help the stock, today trading for a forward price-to-earnings (P/E) ratio of 37.9x, hold steady at its present price levels. Yet, both estimates are far from being set in stone.
Why? Namely, with the pandemic wrapping up, Netflix’s subscriber growth is again falling short of expectations. Fortunately, even with the rising competition, the company’s annual content budget has yet to soar to a point where it threatens earnings growth, if revenue growth comes in less than expected.
With its content costs this year ($17 billion) the same as last year, earnings growth will still be outsized, even if the top grows at a much slower slip. Even so, if earnings fall short of 20%+ growth, it may be enough to contract Netflix’s valuation. Perhaps that will be only a modest correction, but a move down to a forward P/E of 30x would still result in a double-digit decline from today’s prices.
What Analysts are Saying About NFLX Stock
According to TipRanks, NFLX stock has a consensus rating of Moderate Buy. Out of 36 analyst ratings, 26 rate it a Buy, 6 analysts rate it a Hold, and 4 analysts rate it a Sell.
As for price targets, the NFLX average analyst price target today is $599.33 per share, implying around 21.7% in upside from today’s prices. Analyst price targets range from a low of $340 per share, to a high of $720 per share.
Bottom Line: Increased Competition Leaves Netflix Shares at Risk of Going Nowhere, or Lower, From Here
Netflix may remain the leader of the streaming space, but its days of delivering above-average growth may be numbered. As its worldwide subscriber growth slows, top and bottom-line results going forward could fall short of the expectations currently priced into shares.
That’s not to say that NFLX stock is at risk of big declines. Yet, as more investors fear that upside is limited, shares may have a tough time getting back to their highs set earlier this year ($593.29 per share).
Disclosure: Thomas Niel held no position in any of the stocks mentioned in this article at the time of publication.
Disclaimer: The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities.