Electric vehicle (EV) stocks have been volatile lately. Tesla’s As (NASDAQ: TSLA)’s journey proves, there’s huge upside potential for companies that get it right, and if you want to profit from your portfolio, you need to sift through the growing number of failed EV ventures to find potential winners.
Looking ahead to 2030, there’s one EV stock I particularly like.
What EV investors need to know
If you want to invest broadly in the electric vehicle industry, Diversified EV ETFsBut there are some problems with this approach. The biggest problem is that the individual players in the sector have very different offerings. For example, Tesla is much more than an electric car company. It has business segments focused on distributed solar, utility-scale battery storage, autonomous driving software, and charging infrastructure. Lucid GroupOn the other hand, is specialized in electric vehicles and its future depends entirely on its ability to design, manufacture, market and sell EVs to customers.
The industry is also capital intensive, and these companies’ access to capital varies greatly. As a more mature competitor, Tesla generates profits and operating cash flow. Meanwhile, its $775 billion market cap allows it to sell equity and leverage debt markets much more efficiently than its smaller competitors. Consider again Lucid, which has a market cap of just $9 billion. The company is losing money at the bottom line and is losing billions of dollars annually in terms of operating cash flow.
With all this in mind, it’s important to know what you’re betting on when investing in EV stocks. You need to know exactly what a company needs to succeed going forward. You also need to know how well it will survive financially in an industry where it’s common for companies to lose billions of dollars for years before turning a profit. Whether it’ll even get out of the red in the first place is another matter.
This EV stock is the best long-term investment
Its combination of high growth potential and reliable access to long-term capital is unmatched by any other EV stock. Rivian Automotive (Nasdaq: RIVN)A few months ago, I Attractive evaluation Rivian’s stock price has nearly doubled following an industry-wide correction, but it’s not too late to get in. The stock still trades at 3.3 times sales. By comparison, Tesla trades at 9.1 times sales and Lucid at 13.4 times sales. Dig deeper, however, and there’s something even more attractive.
In addition to a relatively attractive valuation, Rivian boasts some of the best customer loyalty in the industry: With only a couple of models currently on the market, it has won the J.D. Power award for Most Satisfying Ownership Experience and been named one of the most beloved automotive brands. Consumer Reports. Some 86% of owners said they would buy a Rivian again, the highest percentage of any car brand, not just EVs.
Rivian currently only sells a few expensive models. However, that will change in the next 2-3 years. The company recently unveiled its next-generation models, the R2, R3, and R3X. It then announced that it received an $827 million incentive package from the state of Illinois to expand its manufacturing base. Also, the Biden administration’s new large tariffs on Chinese-made electric vehicles will only boost domestic demand for Rivian models.
When it comes to access to capital, Rivian has the trump card: In a 2019 funding round, the company raised Amazon The company completed a $2.5 billion private funding round in 2021 led by Amazon’s Climate Pledge Fund as the lead investor, and last month, the company formed a joint venture with a global automaker. Volkswagen It plans to invest $1 billion initially in Rivian and up to an additional $4 billion over the next few years.
As a public company, Rivian can enter the stock market and raise capital through a secondary offering. But it also has deep-pocketed, long-term investors that many other EV startups lack. The capital advantage shouldn’t be underestimated. Last month, the EV maker said it Fisker Tesla filed for bankruptcy, citing high costs and slower-than-expected industry growth. As Tesla has proven, EV companies must make losses and invest heavily for years before they turn a profit. Tesla didn’t post a full-year profit until 2020, 12 years after Musk became CEO. During that time, Tesla managed to increase its annual research and development budget from $200 million to $1.3 billion, even as losses piled up.
Over the past 12 months, Rivian generated roughly $5 billion in revenue. While the company still loses $39,000 per vehicle, that’s a significant improvement from the $67,000 loss per vehicle it made a year ago. These losses partly reflect Rivian’s relatively small scale: it delivers about 14,000 vehicles per quarter, compared with Tesla’s roughly 400,000 per quarter.
Despite its current losses, Rivian’s growth potential is clear: With more affordable models coming to market in 2025 and 2026, and ample leverage to continue raising capital to support these launches, Rivian looks like a great EV stock for patient growth investors.
Should you invest $1,000 in Rivian Automotive right now?
Before you buy Rivian Automotive shares, consider the following:
of Motley Fool Stock Advisor The analyst team Top 10 Stocks Here are the stocks investors should buy right now… Rivian Automotive wasn’t among them. These 10 stocks could generate huge profits over the next few years.
Things to consider NVIDIA This list was created on April 15, 2005…If you invested $1,000 at the time of recommendation, $722,626!*
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John Mackey, former CEO of Amazon subsidiary Whole Foods Market, is a member of The Motley Fool’s board of directors. Ryan Vanzo The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Tesla, and Volkswagen AG. The Motley Fool has recommended the following stocks: Disclosure Policy.
Prediction: Could be the best-performing EV stock through 2030 Originally published on The Motley Fool
