In this piece, I evaluated two electric vehicle (EV) stocks, Lucid Group (NASDAQ:LCID) and Rivian Automotive (NASDAQ:RIVN), using TipRanks’ comparison tool to determine which one takes the win. Lucid designs and manufactures electric luxury sports cars, while Rivian produces an electric SUV and electric pickup truck using a platform capable of supporting future vehicles.
Lucid Group has been plummeting more often than rising. It’s off 66% over the last year and down 8% year-to-date. Rivian Automotive is up 14% year-to-date, bringing its one-year decline to 42%.
After these recent declines, one company looks more reasonably valued, but a closer look should demonstrate whether either is actually a good option. Neither is profitable, so we’ll gauge their valuations using their price-to-sales (P/S) ratios and compare them to their industry’s P/S ratio. The U.S. auto manufacturing industry is trading at a P/S of 2.1, slightly lower than its three-year average P/S of 2.9.
We’ll also look at Tesla (NASDAQ:TSLA)’s P/S for comparison since Lucid and Rivian are EV makers, which typically trade at significantly higher valuations than legacy automakers. Tesla is trading at a P/S of 7.6 versus its five-year mean P/S of 10.7.
Lucid Group (NASDAQ:LCID)
At a P/S of 19.2, Lucid immediately looks expensive. However, the company’s valuation has finally begun to fall back down to earth after trading at a P/S as high as 21,000 (not a typo!). Nonetheless, it looks like profitability is still several years away, and such a high valuation suggests a bearish view may be appropriate.
Most analysts polled by S&P Global Market Intelligence don’t expect Lucid Group to begin generating positive free cash flow or achieve profitability until 2027 — at the earliest. To do that, the company will have to generate over $10.7 billion in sales, up from the $753.5 million it generated over the last 12 months. While Lucid did manage a 2,143% increase in revenue in 2022, such rapid growth might not be sustainable, especially if demand is slowing.
Meanwhile, its net-income margin worsened from -214.5% in 2022 to -338% over the last 12 months, displaying widening losses. Additionally, Lucid widely missed the consensus estimates for its last earnings report. Finally, the company reported “over 28,000” vehicle reservations in its fourth-quarter earnings report versus “over 34,000” in November 2022. Notably, it did not report reservation numbers in its most recent report.
Despite all those concerns, there is a bit of good news. Lucid Group attracted a $1.8 billion investment from the Saudi Public Investment Fund in June. That massive vote of confidence suggests the fund will continue to support Lucid’s cash burn, but it doesn’t change the fact that Lucid remains a risky EV play.
What is the Price Target for LCID Stock?
Lucid Group has a Hold consensus rating based on one Buy, two Holds, and two Sell ratings assigned over the last three months. At $7.10, the average Lucid Group stock price target implies upside potential of 13.96%.
Rivian Automotive (NASDAQ:RIVN)
At a P/S of 6.7, Rivian’s valuation has also plunged, finally falling to a reasonable level, especially considering it’s a slight discount to Tesla’s valuation. The clear path to potentially imminent profitability and its reasonable valuation suggests a bullish view might be appropriate.
Rivian management said in April that they expect the company to be profitable by the fourth quarter of 2024, reiterating their expectations of gross profitability sometime in 2024 during the firm’s August earnings call. While that’s not complete profitability, it marks a major milestone for every unprofitable company. There are also other signs that the company is moving in the right direction.
RIVN smashed the consensus estimate for its latest earnings report, adding that its gross loss per vehicle delivered during the second quarter had plunged to $32,595, down dramatically from the per-unit loss of $67,329 in the previous quarter.
In fact, Rivian’s gross margins and per-unit losses have steadily improved over the last year. It also boosted its production guidance to about 52,000 vehicles this year, more than double the number produced in 2022.
What is the Price Target for RIVN Stock?
Rivian Automotive has a Moderate Buy consensus rating based on 12 Buys, six Holds, and one Sell rating assigned over the last three months. At $28.06, the average Rivian Automotive stock price target implies upside potential of 33.94%.
Conclusion: Bearish on LCID, Bullish on RIVN
It’s common for EV makers to remain unprofitable for many years, but Tesla showed that it’s possible to eventually become profitable with a build-to-order model. However, while Rivian is making rapid, clear progress toward profitability, many questions remain for Lucid, including demand concerns. Finally, despite Rivian’s much better fundamentals, it’s trading at a lower valuation than Lucid, making it the clear winner.
