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.

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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.

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.

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.

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