Rivian vs Tesla: which is the best stock to buy today?

Ben McPoland compares two well-known EV companies to determine which he believes is the best stock for him to buy as things stand.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Electric cars charging at a charging station

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Tesla (NASDAQ: TSLA) and Rivian Automotive (NASDAQ: RIVN) are two very popular choices for investors looking at which stocks to buy in the electric vehicle (EV) space.

While both shares have risen by more than 30% in the past two weeks, there’s only one winner over a longer period. Tesla is up 1,518% in five years while Rivian has crumbled by 88% since listing in late 2021.

Wondering which EV stock looks more attractive right now? Here’s my view.

Should you invest £1,000 in Gsk right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Gsk made the list?

See the 6 stocks

Created with Highcharts 11.4.3Tesla PriceZoom1M3M6MYTD1Y5Y10YALL8 Jul 20198 Jul 2024Zoom ▾Jan '20Jul '20Jan '21Jul '21Jan '22Jul '22Jan '23Jul '23Jan '24Jul '242020202020212021202220222023202320242024www.fool.co.uk

The two firms at a glance

Let’s start with a big picture overview of the two companies. Tesla’s extensive supercharger network and innovations in battery technology give it a big advantage in the EV market. Beyond this, it focuses on energy storage and solar energy solutions.

Meanwhile, a move into self-driving cars (robotaxis) and humanoid robots provides other potential high-growth avenues.

In contrast, the younger Rivian centres its business model on electric trucks as well as SUVs. Its rugged, adventure-oriented line of EVs sets it apart in a niche market, while a partnership with Amazon, which has ordered thousands of its EV delivery vans, is a key strength.

Rate of growth

I believe both firms have significant market opportunities ahead of them over the long run. However, in the here and now, they’re suffering from a global slowdown in EV sales.

Tesla’s second-quarter deliveries fell 4.8% from 466,140 in the same period last year. This was the first time ever that its deliveries had fallen for two straight quarters.

That said, the figure was better than expected, sending the stock up nearly 20% in the days following the report on 2 July.

Rivian’s second-quarter deliveries of 13,790 vehicles also topped expectations. And it’s guiding for full-year production of 57,000, which wouldn’t be much more than last year’s 50,122.

Here’s how Wall Street currently sees the firms’ revenue growing through to 2026.

202420252026
Tesla$99bn$118bn$138bn
Rivian$4.8bn$6.7bn$10.7bn

Valuation

Rivian is still building out its business and isn’t expected to post any profits for many years. In 2023, it lost $5.4bn and there was a free cash outflow of $5.9bn.

Therefore, I can’t assess the stock on a price-to-earnings (P/E) basis. But it has a price-to-sales (P/S) ratio of around 2.8, a significant discount to previous years.

Tesla, on the other hand, is very profitable. Last year, its net income was $15bn, a 19% increase from 2022. At present though, the stock seems bizarrely overvalued on a forward P/E ratio of 88.

My verdict

Rivian’s massive losses worry me, especially in today’s high interest rate environment. At the current rate of cash burn, it will need more money by the end of next year.

On the plus side, if it could ever scale up to become profitable, the stock may produce monster returns given its much smaller market cap ($14.7bn versus Tesla’s $800bn). That’s a big ‘if’ though.

In August, Elon Musk is set to unveil Tesla’s long-awaited robotaxi. This could be a massive market, though it does face competition, notably from Alphabet‘s Waymo. This firm launched its fully autonomous taxi service (Waymo One) in Los Angeles in March.

I own Tesla shares though I won’t add to my holding at today’s valuation. But my choice between the two? It would be Tesla all day long given Rivian’s huge ongoing losses.

Investing in AI: 3 Stocks with Huge Potential!

🤖 Are you fascinated by the potential of AI? 🤖

Imagine investing in cutting-edge technology just once, then watching as it evolves and grows, transforming industries and potentially even yielding substantial returns.

If the idea of being part of the AI revolution excites you, along with the prospect of significant potential gains on your initial investment…

Then you won't want to miss this special report inside Motley Fool Share Advisor – 'AI Front Runners: 3 Surprising Stocks Riding The AI Wave’!

And today, we're giving you exclusive access to ONE of these top AI stock picks, absolutely free!

Get your free AI stock pick

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Ben McPoland has positions in Alphabet and Tesla. The Motley Fool UK has recommended Alphabet, Amazon, and Tesla. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Pound coins for sale — 51 pence?

This seems ridiculous, but we almost never see shares looking this cheap. Yet this recent ‘Best Buy Now’ has a price/book ratio of 0.51. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 51p they invest!

Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.

What’s more, it currently boasts a stellar dividend yield of around 8.5%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?

See the full investment case

More on Investing Articles

Investing Articles

The Rolls-Royce share price has fallen! Is this the moment investors have been waiting for?

Even the Rolls-Royce share price can't escape current stock market volatility, falling slightly over the last week. Should investors consider…

Read more »

Modern suburban family houses with car on driveway
Investing Articles

Down 59% from its 12-month highs, is this FTSE 250 stock too cheap to ignore?

Shares in FTSE 250 housebuilder Vistry are almost certainly too cheap to ignore. But are they discounted enough to offset…

Read more »

Young Asian woman with head in hands at her desk
Investing Articles

As the S&P 500 struggles to recover, here’s what Warren Buffett’s doing

The S&P 500 is fighting to regain its February highs amid ongoing trade tariff uncertainty. Our writer looks to the…

Read more »

Investing Articles

When will Lloyds shares hit £1?

Lloyds shares have surged over the past 12 months, but where will they go next? Dr James Fox thinks there’s…

Read more »

Middle-aged white man wearing glasses, staring into space over the top of his laptop in a coffee shop
Investing Articles

Stock-market crash: the meltdown of the Magnificent 7

Just before Christmas, these Magnificent Seven stocks were riding high. But after the worst quarter for US stocks since autumn…

Read more »

Investing Articles

Wow! IAG shares are undervalued by 47%, according to analysts

IAG shares have surged over the past 18 months, but analysts are pointing to more growth. Dr James Fox takes…

Read more »

Investing Articles

2 cheap FTSE 100 and FTSE 250 shares to consider for an ISA before 5 April!

These FTSE 100 and FTSE 250 shares are on sale today! Here's why long-term Stocks and Shares ISA investors should…

Read more »

Investing Articles

How I’m building a new second income for 2035

Millions of us invest for a second income. Here are the steps Dr James Fox is taking in order to…

Read more »