As pledges for emission reductions continue to make global news, electric vehicle companies are experiencing something of a heyday. Over the past year alone numerous EV companies have come to market, most with extremely high valuations. Here I assess whether two of these EV stocks, Rivian Automotive (NASDAQ:RIVN) and Lucid Group (NASDAQ:LCID), are about to become the next Tesla (NASDAQ:TSLA).
As the largest and most established EV company, Tesla has remained unrivalled for a number of years. Now, new competitors Rivian and Lucid are attempting to shake things up. Both stocks have performed particularly well recently, with Lucid up almost 400% this past year and Rivian up 72% in only a matter of days between 10th and 16th November.
Rivian and Lucid
My main criticisms of these EV stocks is the vast disparity between share prices and company fundamentals. Rivian’s IPO a few weeks ago is a clear example of this, with shares initially floating at $78 then soaring to a peak of $172 within six days. This has given the company a market capitalisation of over $140 billion, all whilst producing zero cars and reporting losses of $1 billion in the first half of 2021.
Lucid is in the same boat as Rivian. Despite not having produced a single vehicle, its market value has surged past that of Ford Motors to reach almost $90 billion. With the first car not scheduled for release until mid 2022 and recent Q3 earnings reporting a net loss of $1.5bn, I believe its current share price is unjustifiable.
Reservations about these overpriced stocks come also from equity research analysts. For example, Morgan Stanley has recently issued a strong sell rating on Lucid, suggesting the stock price will plummet to $16, representing a 70% downside from its peak share price.
Tesla
In comparison to Rivian and Lucid, Tesla remains in the driving seat as an established and profitable industry leader.
In fact, in a tweet just last month, Elon Musk pointed out just how far behind these new EV start-ups are in comparison to Tesla, the only American car maker to have achieved both positive cash flow and high production volumes in the last 100 years.
Although I believe Tesla has an equally lofty valuation, a whopping $1 trillion, its diversification into the autonomous driving sector sets it apart from traditional EV companies, all competing for the same rapidly diluting market share.
The verdict
Whilst both Rivian and Lucid deserve applause for attempting to disrupt the EV industry with their new cars, I think both stocks are extremely overvalued and incomparable to Tesla. For me, their only achievement is that of being two of the largest US companies by market capitalisation with no revenue
New, smaller EV players face the virtually impossible challenge of rivalling Tesla, a company now producing a million cars per year and logging a profit for the fourth consecutive quarter. I believe it won’t be long before Rivian and Lucid stocks are bumped out of the fast lane and so I am steering clear of these stocks.
