Electric vehicle (EV) stocks have trailed the market in 2021, after a spectacular run in 2020. However, this current underperformance is providing an opportunity for investors to buy the dip, as the companies in this space remain poised for spectacular growth in the next decade.

Much of this growth is due to the shift towards clean energy solutions, supported by federal and state governments all around the world via subsidies and other benefits. This in turn will attract both legacy automobile players as well as new entrants into the EV market.

Today I will compare two EV stocks, Lucid Group (LCID) and Nikola (NKLA), to see which is a better buy right now.

Lucid Motors stock has gained momentum

Shares of Lucid Motors have gained 15% in the last month and are up 149% year to date, making it one of the top performers in 2021, among peers. A key driver of its upward spike was a research note by Bank of America analyst John Murphy. The analyst expects the experienced management team at Lucid Motors to comfortably navigate a competitive EV environment, making it one of the “most legitimate” start-ups in this space.

Murphy initiated coverage on Lucid Motors stock with a buy rating and a 12-month price target of $30. LCID stock is currently trading at $25.28, valuing it at a market cap of $41 billion.

Lucid Motors is still pre-revenue but is expected to begin its first shipment of vehicles shortly. 

Further, the company has a product range that has excited EV enthusiasts which allows Lucid Motors to deliver on its lofty promises. Lucid Air has reportedly received 10,000 pre-orders and the company expects to end 2023 with a manufacturing capacity of 53,000 units annually. It will spend around $350 million in CAPEX in the next two years to enhance production capabilities. 

The Lucid Air has a range of 520 miles which is the longest among peers, providing it with an enviable competitive advantage.

Nikola has flattered to deceive

Shares of Nikola are down 27% year to date and trading 86% from record highs. During its second-quarter earnings call, Nikola spooked investors after the company slashed top-line estimates as supply chain issues and chip shortages continue to haunt automobile companies. 

Nikola now expects to deliver between 25 and 50 vehicles compared to its previous estimates of between 50 and 100 deliveries. It lowered revenue forecast to between $0 and $7.5 million for 2021, well below prior estimates of sales between $15 million and $30 million.

Wall Street however expects Nikola’s sales to touch $184.6 million in 2022 with an adjusted loss of $0.92 per share.

The verdict

Both Lucid Motors and Nikola are high-risk investments that might prove to be lucrative over the long run. The two companies will remain unprofitable for a few years before they benefit from economies of scale and improve profit margins. Further, investors should also consider the rising competition from legacy manufacturers who already have the resources to manufacture EVs and gain traction in a rapidly expanding market.

With that being said, I believe Lucid Motors is the better buy.  Not only did Lucid Air Snag the record 520-mile per charge EPA rating this month but Bank of America also launched coverage on the stock with a Buy rating.  Nikola, on the other hand, has grappled with management issues in the past, which has lowered investor confidence significantly.

LCID shares were trading at $25.24 per share on Thursday afternoon, up $0.29 (+1.16%). Year-to-date, LCID has gained 152.15%, versus a 19.85% rise in the benchmark S&P 500 index during the same period.

About the Author: Aditya Raghunath

Aditya Raghunath is a financial journalist who writes about business, public equities, and personal finance. His work has been published on several digital platforms in the U.S. and Canada, including The Motley Fool, Finscreener, and Market Realist. More...

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