Gores Guggenheim Stock Is Cheap for a Reason, But That Is No Reason to Stay Away
In a recent article on Gores Guggenheim (NASDAQ:GGPI) stock, I focused mainly on its valuation angle. That is, the low implied valuation of its special purpose acquisition company merger with Polestar. This in turn made it a buy at current prices, and a screaming buy on further weakness.
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But of course, valuation is just one part of the equation. As we know full well, stocks can be cheap for a reason. The market has its reasons to be skeptical about Polestar.
After all, it's not just competing with Lucid (NASDAQ:LCID) and Tesla (NASDAQ:TSLA). Incumbent automakers, like Volkswagen (OTCMKTS:VWAGY) are rivals as well. Atop the risk of competition, there may be some concern about its China connection.
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Yet is this a reason to stay away? Not so fast. It's possible the market has focused too much on the negatives, and not enough on the positives.
Even when considering concerns/risks, Polestar is a promising EV startup. It's an appealing opportunity, and not onlyy because it's cheaper than peers.
GGPI Stock and Merger Target Polestar
You know the story about Lucid. Unless you've been living under a rock, you know the story behind Tesla. But what's the story behind Sweden-based Polestar, which has become more well-known since its recent Super Bowl ad?
The company actually started off as a motor racing team. From there, it moved into producing prototype gas powered cars. Flash forward to 2015, and Volvo (OTCMKTS:VLVLY) buys it. In 2017, the famed Swedish automaker, along with its China-based corporate parent, Geely (OTCMKTS:GELYF), announced plans to turn Polestar into an EV-only brand.
Flash forward another five years, and it has scaled into an EV maker generating billions in annual sales. During 2021, it sold 29,000 vehicles That's nearly three times what it sold in 2020.
As it ramps up output and its presence beyond Europe, it's finding demand. Polestar's models include its luxury couple Polestar 1 model, along with the Polestar 2, a sedan targeted at the mass affluent market.
That said, I can understand why many are skeptical that it's a potential "Tesla killer" and not just a "wannabe Tesla," one of many now trading in the public markets. However, this take may not be warranted. Instead, the market may be too quickly declaring it an "also-ran," when in reality it's a contender.
Why Investor Concerns May be an Overreaction
Unlike other EV SPACs like Fisker (NYSE:FSR) and Lucid, so far GGPI stock has not made a big leap above its SPAC offering price ($10 per share).