As the bull market buzzes on, those heavily invested in EVs may quietly step aside. Once hailed as the next big thing, this segment hasn’t delivered as expected
While the general perception is that a lot of people will eventually be driving electric cars, against a difficult economic operating environment, softening demand and dog-eat-dog competition, adoption has been slower than anticipated.
And that, in turn, has depressed appetite amongst investors. From the biggest names in the space to the smaller players, EV stocks across the board have suffered badly over the past year.
Not all are turning away, however. Billionaire Israel Englander, the co-founder and CEO of Millennium Management has been keeping tabs on the space and during Q2 doubled down on two EV names that have been taking a sound beating in recent times – Rivian (NASDAQ:RIVN) and Nio (NYSE:NIO).
Millennium, one of the largest hedge funds with $64 billion in assets under management, is known for its diverse strategies. So, it’s worth examining what Englander – who boasts a net worth of $12.4 billion – finds appealing about these two stocks right now. Let’s dive in.
Rivian
Tesla may currently hold the crown as the EV leader, but its reign is far from assured. Rivian is a strong contender with ambitions to overtake Tesla, a possibility that isn’t as far-fetched as it might seem. Many industry experts view Rivian as a genuine challenger, praising its innovative technology and high-quality vehicles, which are becoming more visible on the roads every day.
However, the bears will tell you that it’s all well and good selling nice cars, but you must be able to do so at a profit. That is something Rivian has yet to achieve although it says it remains on track to post a modest gross profit by 4Q24. The other problem for Rivian is that it has been burning through a significant amount of cash as it tries to scale production. Positively, a proposed joint venture with Volkswagen should strengthen the balance sheet; Rivian stands to bring in as much as $5 billion in capital that will go toward producing its more affordable R2 model and assist with the launch of its Georgia manufacturing plant.
Englander must have confidence Rivian will come good eventually. During the quarter Millennium upped its stake in the EV maker by 84%, with the purchase of 2,211,085 shares. These have a current market value of $28.8 million.
Rivian’s recent Q2 results were a mixed bag (a beat on the bottom-line but a miss on sales) offering food for thought for both bull and bears. However, Wedbush analyst Daniel Ives clearly leans toward the bullish side of the argument.
“For now, it is all about setting up the stage for its Gen 2 R1 vehicle production and preparation for the 1H26 R2 launch highlighted by the VW Joint Venture’s boost on its balance sheet which is expected to close in 4Q24. Over the quarter, Rivian had made some significant improvements in the R1 lineup from a production standpoint, successfully completing its re-tooling upgrades which was a necessary step for the company’s future trajectory with a now expected 30% improvement in the R1 production line rate which we believe should positively impact the margin story looking forward,” Ives opined.
Ives underpins these comments with an Outperform (i.e., Buy) rating, backed by a $20 price target. This implies shares will climb ~54% higher over the next 12 months. (To watch Ives’ track record, click here)
Turning now to the rest of the Street, where RIVN’s Moderate Buy consensus rating is based on a mix of 12 Buys, 8 Holds and 2 Sells. Meanwhile, the $18 average price target factors in one-year gains of 38%. (See Rivian stock forecast)
Nio
The next Englander EV pick we will look at is another name that has been dealt a hard blow by the market. Nio shares have been on a multi-year slide, and so far in 2024, are down by 56%.
The drop has come in the face of an improving delivery profile for the Chinese luxury EV maker. Year-to-date through July, vehicle deliveries increased by 43.9% compared to 2023, reaching a total of 107,924. In fact, July represented the third month in a row during which the company crossed the 20,000-unit delivery threshold. Previously, it had only done so once (last July).
But that only tells one part of the story. The Chinese EV market is super-competitive with more than 100 brands vying for consumers’ attention. That has led to a fierce price war. The result is that Nio might have been selling more cars, but revenues have been suffering. Q1 results were disappointing for the top-line, with sales falling by 7.2% year-over-year and 43% sequentially to $1.37 billion. Nio is also burning through lots of cash and still operating at a loss although non-GAAP EPADS of -$0.33 beat the Street’s forecast by $0.06.
That said, revenues are expected to show a big uptick in Q2 (the Street expects more than 90% YoY improvement) while the company is readying to launch its mass market ONVO sub-brand in September, the initial product being the L60 smart electric mid-size SUV.
Englander must be looking forward to all of this. In Q2, Millennium bought 1,484,185 NIO shares, increasing the fund’s stake by 45.5%.
Assessing the company’s prospects, Morgan Stanley analyst Tim Hsiao thinks much hinges on the Onvo L60’s launch. He writes, “Our recent channel checks suggest NIO’s orders have been steady at a ~5k weekly run rate. With improving mix/scale and reduction in promotions for certain models, we expect 2Q GPM to meet the company’s guidance of double digits, or our expectation of low teens. Onvo L60 remains a more crucial stock catalyst, for which we expect more feedback on product, orders, and price in August leading up to the official delivery on September 10. The company has been accepting pre-sale orders at Rmb219.9k.”
Hsiao is the Street’s biggest NIO bull. The analyst has an Overweight (i.e. Buy) rating on NIO shares, backed by a $10 price target. If this target is achieved, investors could realize a potential price appreciation of 152% over the current share price. (To watch Hsiao’s track record, click here)
Overall, NIO has picked up 10 analyst reviews. These break down to 5 Buys and 4 Holds, and 1 Sell, giving the stock a Moderate Buy analyst consensus rating. The average price target of $23 implies an upside of 64% from the current trading price of $3.97. (See Nio stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
