It's been a hectic few weeks for Churchill Capital IV (NYSE:CCIV), which confirmed last month that it would be merging with Lucid Motors to take the nascent electric vehicle (EV) maker public. After speculative fervor drove the stock to nearly $65, shares came crashing down once reality set in and details around the deal's structure were finally disclosed to investors.

With shares currently trading around $20 to $25 over the past few days, here's how Lucid Motors could double your money.

White Lucid Air sedan in a driveway

Image source: Lucid Motors.

Driving back to $40 to $50

There was little question that the stock was overvalued at $65, particularly prior to the definitive agreement being announced since at that juncture the special-purpose acquisition company (SPAC) was still simply a pile of money looking for a target to take public. With details of the transaction in hand, we can now take a look at what it would take for Churchill Capital IV shares, which will change to the ticker "LCID" once the merger closes, to climb back to $40 to $50.

Lucid has delayed deliveries of its flagship Lucid Air luxury sedan from this spring to the second half of 2021. CEO Peter Rawlinson attributed the decision to advice from former Ford CEO Alan Mulally, who is on Churchill Capital's operating team. Mulally encouraged Rawlinson to take the extra time to nail the product's quality. With the timeline pushed back by a few months, investors should similarly have patience for positive catalysts, with Air deliveries being the most significant by far. Until deliveries start and Lucid begins generating revenue, investors should expect the stock to remain extremely volatile.

It's also worth remembering that shares traded as high as approximately $44 on the day immediately after the merger was announced, so there is at least some recent evidence that the market believes Lucid should be worth that much even before deliveries commence. Much of the decline since the deal was announced can be partially attributed to broader weakness within the tech sector, particularly EV stocks that have been soaring (perhaps too high) on hopes for supportive climate policies from the Biden administration.

Looking farther out -- which is the time horizon that long-term investors should be focusing on -- Lucid is forecasting vehicle deliveries of approximately 20,000 in 2022, which should generate over $2.2 billion in sales. There will be 1.6 billion shares outstanding after the merger closes in the second quarter. At $40 per share, that translates into an implied market cap of $64 billion, which would subsequently suggest a forward sales multiple of 29 at that price. At $50, Lucid would be valued at $80 billion and around 36 times 2022 sales.

Justifying the premium

To be clear, these are extremely lofty valuation multiples for an automaker, even one as promising as Lucid. That would represent a significant premium compared to incumbent EV pure plays like Tesla or NIO.

TSLA PS Ratio (Forward) Chart

TSLA PS Ratio (Forward) data by YCharts.

In order to justify such a valuation, Lucid would need to do a few more things. In addition to starting Air production, it needs to ramp its manufacturing operations to actually execute on its growth forecast, which is no easy task. The good news is the company is already laying the literal groundwork, recently securing approval for the second phase of its factory in Arizona from the local zoning commission.

The first phase, which is already complete, is expected to have production capacity of around 34,000 units per year. The second phase will bring that figure to 90,000, which is how many vehicles Lucid hopes to deliver in 2024, generating $9.9 billion in revenue.

Furthermore, Lucid will need to ensure that it can deliver the type of product quality that customers expect from a $170,000 vehicle, while validating its bold technological claims -- over 500 miles of range, the ability to charge 300 miles in 20 minutes with DC fast charging, and industry-leading efficiency that tops even Tesla -- with real-world data and experience.

If Lucid can accomplish all of this, it will pave the way for future growth opportunities in adjacent businesses such as stationary storage and becoming an EV tech supplier to other industries like aviation or agriculture, among others. It won't be easy, but Lucid has a real chance of becoming an EV powerhouse, allowing the stock to double from current levels in the years ahead.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.