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Electric vehicle (EV) stocks have significantly underperformed the markets in the past two years. EV manufacturers are wrestling with headwinds such as rising interest rates, inflation, and lower consumer spending, all of which have translated into a tepid demand environment for high-ticket EVs.
Currently, shares of EV giant Tesla (TSLA) are down 52.8% from all-time highs, while Rivian (RIVN) stock is off a staggering 90% from its record levels. However, given the worldwide transition toward EVs in the upcoming decade, it makes sense to buy the dip and benefit from potentially outsized gains when market sentiment recovers. Let’s see which EV stock is a better buy – Tesla or Rivian.
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The Bull Case for Rivian Stock
Valued at $18 billion by market cap, Rivian delivered over 50,000 vehicles in 2023, up from just 20,300 in 2022. It suggests the company is on track to end 2023 with sales of $4.4 billion, up from $1.6 billion in 2022.
Automobile manufacturing is capital intensive, and most players need to expand their operations to benefit from economies of scale and churn consistent profits. While still unprofitable, analysts expect Rivian to narrow its losses from $6.34 per share in 2022 to $3.55 per share by 2024. To offset its cash burn rates, Rivian has more than $9 billion in cash, providing it with enough cushion to turn profitable.
Rivian more than doubled its manufacturing numbers from 24,337 vehicles in 2022 to 57,232 in 2023. Its rapid expansion should allow the company to increase sales by 165% year over year in 2023.
Along with Amazon (AMZN), Rivian recently bagged a deal from telecom giant, AT&T (T). In order to lower carbon emissions and reduce operating costs, AT&T inked a partnership with Rivian to buy EVs.
Out of the 23 analysts covering RIVN, 13 recommend “strong buy,” three recommend “moderate buy,” and seven recommend “hold.” The average target price for RIVN is $26.09, indicating an upside potential of 44% from current prices.
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The Bull Case for Tesla Stock
Tesla has generated staggering returns for shareholders since its initial public offering (IPO) in 2010, and the stock is up 1,710% in the past 10 years alone.
In Q4 of 2023, Tesla manufactured 494,989 vehicles and delivered 484,507 vehicles. Its vehicle deliveries in 2023 grew by 38% year-over-year to 1.81 million, while production scaled higher by 35% to 1.85 million.
Tesla ended Q3 of 2023 with a net income of almost $1.8 billion, despite a lower gross margin of 17.9%.
The Elon Musk-led company accounts for roughly 50% of total EV shipments in the U.S., and continues to expand its manufacturing capabilities to gain traction in other international markets. Tesla is also looking to invest heavily in artificial intelligence (AI), autonomous driving software, and robotics as it positions itself to benefit from multiple megatrends.
Out of the 27 analysts covering TSLA, eight recommend “strong buy,” two recommend “moderate buy,” 14 recommend “hold,” and three recommend “strong sell.” The average target price for TSLA is $242.38, indicating an upside potential of 10.7% from current prices.
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The Final Takeaway
While Rivian missed on its delivery numbers, Tesla beat estimates in Q4. Even though Rivian isn’t profitable right now, it is growing at a much faster pace, given top-line forecasts, and the stock trades at a lower price-to-sales multiple.
Analysts expect Rivian to grow sales by 42.3% to $6.24 billion in 2024, which means it trades at less than three times forward sales. Comparatively, Tesla’s sales are forecast to rise 20.5% to $117.2 billion in 2024, indicating a price-to-sales ratio of more than 6x.
Given consensus price target estimates and a lower multiple, Rivian looks like the better EV stock to buy today.
On the date of publication, Aditya Raghunath did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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