SOFI vs. LCID: One SPAC Stock is Actually Promising

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For some time, particular goal acquisition firms (SPACs) have been all the fashion on Wall Street, however these occasions are gone, as evidenced by the shuttering of two SPAC exchange-traded funds in a single month. But what in regards to the firms which have already gone public via a SPAC merger? In this piece, we in contrast the shares of two of these firms. With SoFi Technologies (NASDAQ: SOFI) in fintech and Lucid Group (NASDAQ: LCID) in electrical automobiles, these two could not be extra totally different. However, this comparability flags some key points with SPAC firms that stay lengthy after the merger is full.

SoFi Technologies (SOFI)

SoFi Technologies is an attention-grabbing firm. On the one hand, it is a high-growth firm, and its internet losses have been trending decrease slowly over the previous couple of quarters. On the opposite hand, SoFi stays wholly unprofitable, and Wall Street has been severely punishing unprofitable firms this 12 months. However, I’m giving the stock a bullish view for a couple of causes — with the caveat that this is an ultra-high-risk funding not appropriate for each investor.

One of the large points with SPAC shares is that many of the firms gave extraordinary projections they could not presumably obtain when merging with their SPAC. However, in SoFi’s case, it projected adjusted internet income of about $1 billion in 2021, and it managed to fulfill that projection, reporting $1.01 billion in adjusted internet income.

The firm additionally projected adjusted EBITDA of $27 million in 2021, which it additionally managed, coming in at round $30.2 million. SoFi’s capability to fulfill the projections it made when saying its SPAC merger makes it a standout amongst SPAC shares. The sturdy progress of its many segments additionally suggests the corporate could possibly be price contemplating.

Additionally, insiders have been loading up on the company’s stock because it went public, demonstrating their religion within the firm. Unfortunately, President Biden’s cancellation of pupil mortgage debt is taking a chunk out of SoFi Technologies.

However, its different segments are rising a lot that this concern appears overblown. Further, legal professional Stanley Tate of Tate Law suggests most of SoFi’s pupil loans aren’t even eligible for forgiveness, with the exception being solely sure loans refinanced in the course of the pandemic.

While SoFi Technologies is down 62.6% year-to-date, it is solely down 15% for the final six months and is up 15% within the final month, suggesting stabilization in its shares.

What is the Price Target for SOFI stock?

SoFi Technologies has a Moderate Buy consensus score based mostly on seven Buys, 5 Holds, and 0 Sell rankings assigned over the past three months. At $7.86, the typical worth goal for SoFi Technologies implies upside potential of 34.1%.

Lucid Group (LCID)

Unlike SoFi, Lucid Group is one of many many SPAC shares responsible of giving projections they could not presumably meet. The firm mentioned it anticipated to ship 20,000 automobiles in 2022, however its most up-to-date steering now suggests it is on monitor to ship solely 6,000 to 7,000 automobiles this 12 months. Other considerations lead me to a bearish view of Lucid, though this may change if issues flip round.

Lucid additionally mentioned throughout its SPAC merger presentation that it will attain a manufacturing fee of 500,000 automobiles by 2030, amounting to a 4% share of the market. It’s arduous to see how that is doable now, however buyers are clearly searching for the following Tesla (NASDAQ: TSLA).

In its early days, when it was burning by way of extraordinary quantities of money yearly, it regarded like Tesla would by no means survive, however the bears ended up being spectacularly mistaken. However, it is too early to make this dedication about Lucid, as extra volatility is probably within the close to time period.

Additionally, Lucid insiders shifted from buying to selling shares about three months in the past, which could possibly be a purple flag, and it continues to boost billions in money.

What is the Price Target for LCID stock?

Lucid has a Hold consensus score based mostly on three Buys, one Hold, and two Sells assigned over the past three months. At $18.80, the typical worth goal for Lucid Group implies upside potential of 39.2%.

Conclusion: Bullish on SOFI, Bearish on LCID

Lucid’s story is the identical as that of different SPAC shares: pie-in-the-sky projections it couldn’t meet aimed toward wooing buyers into approving the merger and an absence of income with no clear path to profitability. However, SoFi seems to have actual promise, though this dangerous bull thesis will take a while to play out – if it does in any respect.

Finally, each have excessive quick curiosity, with Lucid at 22.4% of the float and SoFi at 12.6%, suggesting a short squeeze may be doable, however buyers should not guess on that. Additionally, Lucid appears to be like costly at a trailing P/S of 54.4x versus SoFi’s 4.0x.

Disclosure

The views and opinions expressed herein are the views and opinions of the creator and don’t essentially mirror these of Nasdaq, Inc.



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