Electric vehicle (EV) makers are under pressure as demand remains lackluster due to macroeconomic headwinds. Moreover, a price war to spur volumes and fight competition is hurting the margins of automakers. Nonetheless, several experts anticipate that EV demand will improve as the year progresses due to potential interest rate cuts and government incentives to boost EV adoption. With that in mind, we used TipRanks’ Stock Comparison Tool to place Rivian (NASDAQ:RIVN), Tesla (NASDAQ:TSLA), and Li Auto (NASDAQ:LI) against each other to find the EV stock with the highest upside, as per Wall Street analysts.
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Rivian Automotive (NASDAQ:RIVN)
American EV maker Rivian recently reported a 71% year-over-year rise in its Q1 2024 deliveries to 13,588 vehicles. The company produced 13,980 vehicles in the quarter and reaffirmed its full-year production guidance of 57,000 vehicles.
Meanwhile, Rivian is shutting down its Normal, Illinois factory for retooling from April 5 to 30. It expects this move to significantly reduce fixed costs per vehicle delivered by the end of this year and boost the production line rate by 30%.
While Rivian is taking several measures to lower costs and improve margins, investors remain concerned about the continuous cash burn and the fact that it remains an unprofitable company. RIVN reported a net loss of $5.43 billion in 2023 compared to $6.75 billion in the previous year. RIVN shares have fallen more than 55% year-to-date amid profitability troubles.
Rivian expects to achieve modest gross profit in Q4 2024 through continued cost reduction and improved efficiency. The company sees better times ahead, supported by the recently unveiled R2 SUV offering.
What is the Future Price of Rivian Stock?
Following Rivian’s Q1 deliveries report on April 2, Truist analyst Jordan Levy reaffirmed a Hold rating on RIVN stock with a price target of $11. The analyst contended that while the company’s robust Q1 numbers helped in addressing some of the bearish concerns related to EV demand, he remains on the sidelines due to the near-term impact of the Normal factory shutdown on volumes, margins, as well as cash flows and long-term capital requirements.
He expects Rivian stock to be range-bound until the company delivers sustainable improvement in its gross margin following the Normal factory shutdown.
Wall Street has a Moderate Buy consensus rating on Rivian stock based on 12 Buys, nine Holds, and three Sells. The average RIVN stock price target of $17.67 implies more than 69% upside.
Tesla (NASDAQ:TSLA)
Tesla stock has plunged more than 30% since the start of the year due to disappointing sales, declining margins, and concerns about the impact of growing competition from emerging players.
The Elon Musk-led company recently reported an 8.5% drop in its Q1 2024 deliveries to 386,810. The company blamed the lower volumes on the early phase of the production ramp of the updated version of Model 3 at the Fremont factory and the factory shutdowns caused by the Red Sea crisis and the arson attack at the Berlin factory.
However, investors are increasingly worried about the extent to which weak demand and intense competition are dragging down Tesla’s performance. Adding to investors’ woes, last week, Reuters reported that Tesla might abandon its Model 2 affordable car initiative to advance its plans to roll out its Robotaxi. Musk slammed the Reuters report and announced on X the launch of Robotaxi on August 8.
Is Tesla a Buy, Sell, or Hold Stock?
Reacting to the Reuters report, UBS analyst Joseph Spak said that if Tesla cancels the Model 2 program, this move would drag down the stock as he expects Robotaxi to take longer to develop and face higher regulatory hurdles. He thinks that in the absence of Model 2, TSLA’s volume growth would become more challenging due to the EV maker’s aging product portfolio and lack of new models in the pipeline.
Spak has a Hold rating on TSLA stock with a price target of $160.
With 19 Holds, nine Buys, and seven Sells, Tesla has been assigned a Hold consensus rating. The average TSLA stock price target of $196.72 indicates nearly 14% upside potential from current levels.
Li Auto (NASDAQ:LI)
The Chinese EV market is under pressure owing to sluggish demand due to macro uncertainties and intense competition. After impressing with its resilient performance in 2023, Li Auto disappointed investors when it significantly lowered its Q1 2024 deliveries guidance, reflecting the tough conditions in China’s EV market and strategic mistakes related to Li Mega MPV (multi-purpose vehicle), the company’s first battery electric vehicle (BEV) offering.
At a time when key rivals are slashing their prices and offering discounts, Li Auto launched Mega at a higher-than-expected price. Li Auto drastically reduced its Q1 2024 deliveries outlook, citing a lower-than-expected order intake.
Nonetheless, the company delivered 28,984 vehicles in March and 80,400 vehicles in Q1 2024, surpassing its recently lowered guidance range of 76,000 to 78,000 units. The Chinese EV maker’s March deliveries increased 43% compared to February and were up 39.2% year-over-year.
Is Li Auto a Good Investment?
Following the Q1 delivery report, Morgan Stanley analyst Tim Hsiao reiterated a Buy rating on Li Auto stock with a price target of $65. The analyst believes that the market will focus on the company’s L6 vehicle and new Air series before refocusing on BEVs in the second half of the year.
Hsiao added that the new Air version, delivery for which will commence in May, and the L6 launch could drive more meaningful sales momentum into the second quarter of 2024.
Li Auto scores a Strong Buy consensus rating based on 10 unanimous Buys. The average LI stock price target of $53.83 implies 72.2% upside potential from current levels.
Conclusion
Wall Street is highly bullish on Li Auto stock but cautiously optimistic about Rivian. Most analysts are sidelined on Tesla on demand concerns and declining margins. Currently, analysts expect higher upside potential in Li Auto stock than the other two players.
As per TipRanks’ Smart Score System, Li Auto scores eight out of 10, indicating that the stock could outperform the broader market averages over the long term.
