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2 Top EV Stocks Ready for a Bull Run

2 Top EV Stocks Ready for a Bull Run

Global sales of electric cars more than doubled last year and their share rose to 9% of total car sales for the year. In the US, electric cars accounted for 4.5% of total car sales in 2021. So while the share of electric car sales is increasing, they still make up a small proportion of total car sales, offering huge growth potential in the coming years.

Let’s take a look at two top electric vehicle (EV) stocks — Lucide Group (LCID -3.74% and Rivian (RIVN -5.91% — which appear to be benefiting from the expected growth in EVs.

These 2 EV Stocks Corrected Significantly

The markets are clearly in correction territory. The S&P 500 Index corrected 13%, while the Nasdaq composite The index is down 21.3% at the time of writing so far.


Data by YCharts

Risky stocks tend to fall more during market corrections. Lucid stock is down 50% this year, while Rivian stock is down 70% so far this year.

Rivian’s initial public offering (IPO) in November last year was the largest in the US since 2014. The stock rose significantly shortly after the IPO, reaching a valuation of more than $100 billion. However, the stock experienced a drastic correction after the initial euphoria. Similarly, Lucid’s valuation crossed $90 billion in November and has fallen dramatically since then.

Investors’ aversion to risky names amid the broader market correction resulted in the sharp decline in Lucid and Rivian stocks, which traded at high valuations to begin with. Missed fourth-quarter production targets and lowered 2022 forecasts from both companies further terrified investors.

Are these EV stocks ready for a revival?

The correction in Lucid and Rivian’s stock has brought them to a level where they could finally be attractive to some investors. If the market recovers from here, the two stocks should also do better.

Charts showing Lucid and Rivian's forward PS ratios and revenue estimates for the next fiscal year are falling.

Data by YCharts

Analysts expect Lucid to generate $3.5 billion in revenue this year, while estimated revenues for Rivian are $6.4 billion. Based on these estimates, the forward price-to-sell ratios for Lucid’s and Rivian’s shares are 9.1 and 4.5, respectively.

While these ratios still look high, it’s because of the current low level of sales. Over the next few years, sales should increase many fold, bringing proportions to much more reasonable levels. A direct comparison is not suitable, but for perspective, Tesla the stock trades at a forward price-to-sell ratio of 8.3.

Lucid recently announced a deal for up to 100,000 EVs with the government of Saudi Arabia. Likewise, Rivian already has a first order of 100,000 vans from Amazon† Lucid’s cars offer some of the best features and range of cars available on the market. Likewise, Rivian is one of the first EV makers to offer an electric pickup truck and has received very positive reviews for its truck.

While Lucid and Rivian’s fourth-quarter performance was weak, it’s important to note that all of the leading automakers have been hit by supply chain shortages of late. As young EV companies, both Lucid and Rivian face major challenges and risks.

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