The final six months haven’t been sort to inventory market buyers. Most fairness indices traded close to report highs in 2021 and have since moved considerably decrease year-to-date.
Progress shares throughout sectors have been hammered as a result of varied elements that embody rising rates of interest, provide chain disruptions, inflation, rising commodity costs, geopolitical tensions, and the prospect of a world recession.
Electrical automobile shares corresponding to Rivian (NASDAQ: RIVN) and Lucid Motors (NASDAQ: LCID) are presently buying and selling 81% and 64% beneath all-time highs. Nevertheless, because it’s inconceivable to time the market, each main dip in share costs will be considered as a possibility to purchase high quality corporations at a decrease a number of.
Whereas Rivian and Lucid Motors are trailing the broader markets in 2022, let’s see why Wall Avenue stays bullish on the 2 electrical automobile producers.
Lucid Motors
Shares of Lucid Motors went public in early 2021 and touched an all-time excessive of $57.75. LCID inventory is presently buying and selling at $20, valuing the corporate at $33.3 billion by market cap. Lucid Motors began shipments of its autos in This autumn of 2021. As of Might 5, Lucid’s automobile reservations surpassed 30,000 models, bringing in $2.3 billion in potential income.
Lucid confirmed it will manufacture between 12,000 and 14,000 autos in 2022, whereas analysts count on the corporate to report $1.38 billion in gross sales this yr. In Q1 of 2022, Lucid Motors reported income of $57.7 million on the again of upper buyer deliveries of Lucid Air autos.
Lucid Motors ended Q1 with $5.4 billion in money, offering it with sufficient liquidity to broaden manufacturing capability and profit from economies of scale over time. In the course of the Q1 earnings launch, Lucid Motors acknowledged it signed a take care of the federal government of Saudi Arabia, the place the latter has dedicated to buy as much as 100,000 electrical autos from the corporate within the subsequent 10 years.
Wall Avenue additionally forecasts gross sales to the touch $3.5 billion in 2023, valuing LCID inventory at 9.5x ahead gross sales, which is steep given an unsure macro atmosphere. LCID inventory is buying and selling at a reduction of fifty%, given the 12-month consensus value goal is $30.
Rivian
Backed by giants corresponding to Amazon and Ford, Rivian is one other electric vehicle stock with stable long-term prospects. As of Might 9, Rivian confirmed it had 90,000 pre-orders for its R1 pickup truck and SUV autos. Additional, Amazon has additionally pre-ordered 100,000 battery-powered supply autos from Rivian, which will likely be shipped by 2030.
Rivian started manufacturing in 2021 and has since manufactured 5,000 autos to this point. It now goals to extend manufacturing capability to 25,000 in 2022 after transport 2,553 autos in Q1.
In response to analyst estimates, Rivian is forecast to report income of $1.84 billion in 2022 and $6.47 billion in 2023. So, RIVN inventory is presently valued at 4.4x subsequent yr’s gross sales, making it cheaper than Lucid Motors. Wall Avenue expects Rivian inventory to virtually double within the subsequent 12-months, given its depressed valuation.
The underside line
Lucid Motors and Rivian are a part of quickly increasing addressable markets. In response to a report from Allied Market Analysis, the worldwide electrical automobile market is forecast to the touch $823.75 billion by 2030, in comparison with $163 billion in 2020.
Nevertheless, these two development shares are additionally high-risk bets for buyers because of the challenges confronted by the auto sector, which is extremely capital intensive.
The following 12-months will likely be extraordinarily difficult for electrical automobile buyers as a result of rising nickel costs, a important part used to fabricate lithium-ion batteries. Russia is a serious provider of nickel, however the nation has been slapped with quite a lot of sanctions because of the invasion of Ukraine.
Earlier this yr, funding financial institution Morgan Stanley forecast enter prices for EVs to rise by $1,000 within the U.S. As well as, the availability chain glut and lockdowns in China, coupled with decade-high inflation will harm each demand and provide for EV corporations in 2022.
Additional, the uptick in rates of interest will increase the price of debt for Rivian and its friends. The 2 producers should pump in billions of {dollars} in capital expenditures earlier than turning worthwhile. Whereas Rivian and Lucid have an enviable conflict chest, it’s fairly probably each will increase capital inside the subsequent few years, which can strain their steadiness sheets or dilute shareholder wealth.
Competitors from legacy producers corresponding to Ford, Toyota, and Common Motors may also affect income development for Lucid and Rivian going ahead.
