In the last few trading sessions, shares of electric vehicle (EV) companies such as Lucid Group (LCID - Get Rating) and Rivian (RIVN - Get Rating) have been extremely volatile. Both companies are yet to generate any meaningful sales but already command a multi-billion-dollar valuation.

LCID stock was listed on the NASDAQ in early 2021 and has since returned over 400% to shareholders.  However, the stock is also down 20% from all-time highs. Comparatively, RIVN went public this month and its IPO was priced at $78 per share. RIVN stock touched a record high of $179 last week but has fallen about 33% since then.

Today I’ll analyze both EV companies to determine which should be on your shopping list right now.

The bull case for Lucid Motors

Lucid Motors is valued at a market cap of $84 billion. As of November 15th, the company had reservations for more than 17,000 vehicles with an order book of $1.3 billion.

In Q3 of 2021, Lucid Motors managed to strengthen its balance sheet by closing the de-SPAC reverse merger bringing close to $4.4 billion in cash. The company continues to invest heavily to expand its manufacturing capabilities as well as increase spending in research and development.

One of the key differentiators for Lucid Group is the driving range of its six vehicles that exceed 450 miles on a single charge. The Dream Edition R has a range of 520 miles on a single charge which is the highest among EVs right now.

Lucid Motors expects to deliver 20,000 vehicles in 2022 and 90,000 vehicles by 2023. Analysts tracking the stock expect its sales to touch $1.74 billion in the next year, up from a minuscule $76 million in 2021. It is also eyeing expansion in international markets such as China and Saudi Arabia which will be a key driver of top-line growth for Lucid Motors in the future.

The bull case for Rivian

Rivian is backed by e-commerce giant Amazon (AMZN) that has a 22% stake in the company. In fact, Amazon has placed pre-orders with Rivian for 100,000 delivery vans. Legacy automobile company Ford (F) also invested $500 million in Rivian in early 2019. The investment was strategic in nature, as the two companies aimed to create a battery-powered EV. However, Ford is now investing heavily to create its own fleet of EVs and is no longer developing a vehicle in partnership with Rivian.

According to the company’s SEC filings, Rivian has a manufacturing capacity of 150,000 at its Illinois plant and this figure is expected to rise to 200,000 by 2023. In addition to the Amazon pre-orders, Rivian also has 55,400 orders for its line-up of R1T and R1S vehicles.

Despite generating no sales until now, Rivian is valued at a market cap of $102 billion. 

The verdict

Both Lucid Motors and Rivian remain high-risk high-reward bets right now, given their steep valuations. These stocks are extremely vulnerable, especially if markets turn bearish going forward. The two companies need to consistently outpace market expectations in terms of earnings and revenue to support their sky-high multiples.

However, though it’s a high risk/reward bet, I believe that Rivian is currently the better investment.  Not only does Rivian have solid financial backing that will provide it with enough financial flexibility required to navigate this capital-intensive industry but their investors will continue to support the company as the company grows.  For instance, Amazon has placed orders for 100,000 electric delivery vans and Ford provides Rivian manufacturing expertise. 

LCID shares were trading at $51.10 per share on Tuesday morning, down $0.02 (-0.04%). Year-to-date, LCID has gained 410.49%, versus a 26.12% 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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