2 Electric Vehicle (EV) Stocks to Buy Hand Over Fist and 1 to Avoid
The electric vehicle (EV) market has gone through some wild swings over the past few years. Dozens of EV-related companies went public during the buying frenzy in growth and meme stocks in 2020 and 2021, but many of those stocks burned out in 2022 and 2023 as rising interest rates popped the speculative bubble.
Many investors might want to shun all EV stocks after that wipeout, but there are still plenty of beaten-down plays that might skyrocket as the sector warms up again. Today, I'll take a closer look at two out-of-favor EV stocks that are still worth buying -- and one that you shouldn't touch with a 10-foot pole.
Image source: Rivian.
An EV stock to buy: Rivian Automotive
Rivian (NASDAQ: RIVN) produces electric pickups, SUVs, and custom delivery vans for its top investor, Amazon (NASDAQ: AMZN). Unlike many other smaller EV makers that are struggling to ramp up their production, Rivian already produced 24,337 vehicles in 2022 and more than doubled its production to 57,232 vehicles in 2023.
It's also been installing its own in-house Enduro drive unit into more vehicles to reduce its production costs and dependence on third-party components. As a result, it expects its gross margin to finally turn positive by the fourth quarter of 2024.
Unfortunately, Rivian's stock still declined more than 20% over the past 12 months after it predicted its production would flatline at about 57,000 vehicles in 2024. It attributed that slowdown to tougher macro headwinds, stiff competition from other EV makers, and the temporary shutdown of its main plant in Illinois for some technological upgrades.
However, from 2023 to 2026, analysts still expect Rivian's revenue to increase at a compound annual growth rate (CAGR) of 39% as it expands its production capabilities, rolls out its new R2 and R3 SUVs, and continues to deliver more vans to Amazon. It won't turn profitable anytime soon, but its stock looks dirt cheap at 2 times this year's sales.
An EV stock to buy: ChargePoint
Another underappreciated EV stock is ChargePoint (NYSE: CHPT), the largest builder of EV charging stations in North America and Europe. Its revenue soared 65% in fiscal 2022 (which ended in January 2022) and 94% in fiscal 2023 but rose just 8% in fiscal 2024.
That slowdown was caused by the cooling EV market, macro headwinds that prevented businesses from installing new charging stations, and persistent competition from Tesla's (NASDAQ: TSLA) Superchargers. Its gross margins also plunged as its revenue growth decelerated and its net losses widened. That's why ChargePoint's stock lost more than three-quarters of its value over the past 12 months.
However, after that steep decline, ChargePoint's stock looks like a bargain at less than 2 times this year's sales. Its growth could accelerate significantly once the EV market stabilizes and the macro environment improves. It expects to resolve its inventory issues and scale up its manufacturing capabilities in Asia in the second half of 2024, and analysts expect its revenue to grow at a CAGR of 21% from fiscal 2024 to fiscal 2027.
ChargePoint isn't profitable yet, but it expects its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) to turn positive in the fourth quarter of fiscal 2025. It might be smart to buy its beaten-down stock before it reaches that milestone.
An EV stock to avoid: Lucid
Lucid (NASDAQ: LCID) is a maker of luxury electric sedans. It's led by Tesla's former chief vehicle engineer Peter Rawlinson, but it's struggling to ramp up its production. It originally claimed it could deliver 20,000 vehicles in 2022 and 49,000 vehicles in 2023 -- but it only delivered 4,369 vehicles in 2022 and 6,001 vehicles in 2023. It blamed that slower-than-expected growth on supply chain constraints, production delays, recalls, and the broader slowdown of the EV market.
For 2024, Lucid expects to deliver 9,000 vehicles. It plans to roll out its Gravity SUV, which was originally scheduled to launch in 2023, by the end of the year. However, it has also repeatedly slashed its prices over the past year to sell more vehicles.
Lucid's stock has already plummeted 60% over the past 12 months, but it still doesn't seem like a bargain at 9 times this year's sales. Analysts expect its revenue to grow at a CAGR of 83% from 2023 to 2026, but I think those estimates could be too optimistic. The company isn't anywhere close to breaking even yet, and it's betting heavily on support from the Saudi Arabian government -- which owns more than 60% of its shares through its Public Investment Fund (PIF) -- to scale up its struggling business. Investors shouldn't believe that bullish narrative until a few more green shoots appear.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Leo Sun has positions in Amazon. The Motley Fool has positions in and recommends Amazon and Tesla. The Motley Fool has a disclosure policy.
