Don’t trade; park in GGPI stock for long-term gains
A close up of a Polestar vehicle in front of a company sign.
Source: Jeppe Gustafsson / Shutterstock.com
Positive company-specific news and a broader market rally are being overlooked in special purpose acquisition company (SPAC) Gores Guggenheim (NASDAQ:GGPI) Thursday. Shares of GGPI stock are down 2.05% year-to-date.
Wall Street is digesting a number of ongoing threats weighing on the stock market this year and opting to improve on this past week’s positive market developments.
Driving the session’s broader market bid, the U.S. government announced yesterday morning that it will expand sanctions on Russia. Investors are also showing bullish resolve in front of the release of the Federal Open Market Committee minutes. But what about GGPI?
As noted, the market’s bullish rallying cry has been lost on GGPI stock and even turned a blind eye on Gore Guggenheim’s encouraging Polestar electric vehicle (EV) update. So, is opportunity knocking or is a fair warning being served?
Let’s look at today’s GGPI news and other bull and bear arguments relevant to the EV SPAC play, then offer a risk-adjusted determination aligned with those findings.
GGPI
Gores Guggenheim
$11.56
Value and Execution Under the Hood
Consumers love their Teslas (NASDAQ:TSLA). But a growing number of Europeans, Chinese and now Australians are also finding GGPI’s macho Gran Turismo style Polestar 1 and Polestar 2 to their liking.
In fact, this past year, Polestar successfully sold 29,000 of its EVs. That is an increase of roughly 185% from 2020. And in 2022, the outfit has forecasted it will more than double production and reach a global sales target of around 65,000 vehicles.
Today, Americans can get in on the action, too.
On Thursday, GGPI stock’s Polestar announced its Long Range Single Motor Polestar 2 fastback is available for purchase in the U.S. vis-à-vis a direct-to-consumer online purchase or at any number of its showroom “Spaces” across the country. And depending on where you park your Polestar, it could cost less than $35,000 to put those muscular-looking wheels to the pavement.
This is positive news as it is the latest confirmation of GGPI’s Polestar delivering promises.
At the moment, GGPI stock is priced at a significant price-to-sales discount compared to TSLA stock, as well as peers Lucid Motors (NASDAQ:LCID) and Rivian Automotive (NASDAQ:RIVN).
And given management’s solid execution thus far and taking that a step or two further, shares could fetch a double inside of 18 months based on share’s “see-through” valuation.
Applying the Brakes in GGPI Stock
Covid-related chip and lithium battery supply chain woes, inflation and worrisome rate policy and geopolitical tensions with China and Russia have weighed on many EV companies. And there is little denying that bears have cashed in on those factors.
In recent weeks, Lucid and Rivian have given warnings and cut production schedules on the back of the challenging environment. Bears contend it would be arrogant to think GGPI stock isn’t immune to these issues. What’s more is that the situation could grow far worse for all involved. Higher prices at the gas pump caused by the conflict in Ukraine should also seemingly be a tailwind for EV’s.
But as InvestorPlace’s Josh Enomoto recently noted, Ukraine’s status as a major lithium supplier could serve to hurt GGPI’s Polestar and many EVs. Were Russia to seize control of the country, with the metal so critical to today’s EV battery technology, it could be disastrous for the industry’s manufacturers.
Another talking point for GGPI stock bears is Polestar’s lineage. Polestar is a Swedish company, but the company’s birth is the result of a hook-up between Volvo Cars and China’s Geely Holdings (OTCMKTS:GELYY).
Currently, Polestar manufactures out of two facilities in China. And while future manufacturing is planned for the U.S., given the tenuous state of diplomatic affairs between the two countries, it could be awhile before that happens.
Approaching GGPI Stock
Gores Guggenheim (GGPI) weekly pullback near NAV looks attractive for buyers of GGPI stock
There is no such thing as a perfect investment and that certainly holds true with GGPI stock’s Polestar.
But in weighing some of today’s pros and cons surrounding shares, if investors are looking for exposure to the EV market, a purchase appears reasonable.
With shares confirming a constructive weekly chart pullback entry not terribly far removed from GGPI’s SPAC $10 net asset value, buying the stock looks even more attractive.
To stay the course in GGPI stock and as shares de-SPAC into Polestar, I like the idea of a modified collar position.
One combination which can help avoid potential crash-test dummy situations and profiting from a drive higher is buying GGPI stock, while packaging a long July $10/$7.5 put spread for insurance and selling the July $17.50 call for approximately even money.
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.
