Shares of Rivian Automotive and Lucid Group, two prominent electric vehicle start-ups, have recently garnered new ratings and are seeing a rise in early trading.
Rivian: A Promising Investment
Stifel analyst Stephen Gengaro has initiated coverage of Rivian stock with a Buy rating and a $23 price target. Gengaro highlights several key positives for Rivian, including its high brand awareness and its cost-cutting measures that can help reduce operating losses.
Lucid: An Attractive Contender
Gengaro also initiated coverage of Lucid stock with a Hold rating and a $5 price target. According to Lucid’s latest proxy, the Public Investment Fund, a Saudi sovereign-wealth fund, has the largest stake in Lucid stock at 60.6%. This significant ownership by the deep-pocketed Saudi PIF fund provides ample support for Lucid’s capital needs.
The Need for Lower-Priced Vehicles
While Lucid is backed by attractive vehicles and Saudi support, Gengaro notes that the company would benefit from lower-priced vehicles in order to sell more cars. However, such vehicles are anticipated to be available in the market in the next two to four years.
Market Ratings and Targets
Gengaro’s ratings align with his Wall Street peers’ sentiments. Approximately 70% of analysts covering Rivian stock rate it as a Buy. In comparison, only 6% of analysts covering Lucid have recommended a Buy rating.
The average price target for Rivian stock is approximately $26, while the average target price for Lucid is around $5.30.
In conclusion, both Rivian and Lucid present exciting prospects in the electric vehicle industry, with Rivian currently regarded as the more favorable investment option. With high brand awareness and cost-cutting measures, Rivian demonstrates the potential for profitability. On the other hand, Lucid benefits from its attractive vehicles and strong backing from the Saudi PIF fund. Nevertheless, Lucid would benefit from introducing lower-priced vehicles to drive further sales growth. As the market continues to evaluate these start-ups, investors should consider these factors when making investment decisions.
Lucid and Rivian: A Tale of Valuation and Growth
Strategy, product lineup, competition, and other factors can all determine a company’s ratings. One crucial factor that affects ratings is valuation. Currently, Lucid stock is trading at approximately six times its estimated 2024 sales, considering both the company’s debt and cash. In contrast, Rivian stock trades at around two times its estimated 2024 sales.
It is worth noting that neither Lucid nor Rivian have a price-to-earnings ratio as both companies are not yet profitable.
In premarket trading, Rivian stock showed a modest 2.4% increase to $18.82 per share. Meanwhile, the S&P 500 futures remained flat, and the Nasdaq Composite futures experienced a slight uptick of 0.2%.
On the other hand, Lucid stock saw a 1.4% increase to $4.47 per share. Despite being adversely affected recently, Lucid stock still holds promise, which is why a Hold rating is more appropriate than a Sell rating.
Over the course of the last year, Lucid stock has experienced a significant decline of nearly 50%, while Rivian shares have dropped approximately 34%. Factors such as higher interest rates and increased competition in the electric vehicle (EV) market have contributed to this decrease in investor enthusiasm for companies that are yet to generate profits.
However, there is optimism within the industry. According to Gengaro, an industry expert, electric vehicle sales have faced challenges influenced by macroeconomic factors as well as EV-specific obstacles like range anxiety, vehicle costs, model availability, and charging infrastructure. Fortunately, it is believed that these hurdles will gradually subside in the next few years, clearing the path for robust sales growth within the EV sector.
Given this positive outlook, all EV players stand to benefit from the evolving landscape.