Electric vehicle (EV) stocks may turn out to be one of the most promising investments for long-term investors with a large risk appetite. The global shift towards clean energy solutions makes companies such as Tesla (TSLA) and Mullen Automotive (MULN) top bets right now.
While Tesla leads the EV space, and accounts for the majority of vehicle shipments, Mullen Automotive is a new entrant valued at a market cap of just $100 million.
Investors purchasing shares of EV companies might experience increased volatility in the near term for a variety of reasons. But every significant pullback in their stock prices presents investors with a buying opportunity. Let’s see which between Tesla and Mullen Automotive should be part of your portfolio today.
Tesla stock is down 27% from all-time highs valuing the company at a market cap of $935 billion. However, if you zoom out, TSLA stock has returned 12,850% to investors in the last 10 years. An entity that has already revolutionized the automobile sector, Tesla has forced legacy auto manufacturers to enter the EV market.
Tesla has successfully built cars that can travel long distances on a single charge driving consumer demand higher over time. This allowed Tesla to increase sales at an annual rate of 50% in the last five years.
Tesla is consistently profitable and analysts expect its adjusted earnings to increase at an annual rate of 22% in the next five years. Comparatively, its revenue is forecast to grow by 53.8% to $83 billion in 2022 and by 26% to $104 billion in 2023.
Tesla will soon start manufacturing vehicles at its factories in Berlin and Texas, allowing the company to benefit from economies of scale. Further, it has also garnered strong interest from buyers for its upcoming vehicles such as the Cybertruck and Semi.
Shares of Mullen Automotive rose by 18.9% on March 18 and are up by another 37% today. In the last month, the stock has gained by a monstrous 537% but it’s also down more than 23% year-to-date.
A key reason for the upswing in Mullen stock can be attributed to news reports which mentioned the company will soon begin manufacturing the Mullen Five which is an electric crossover vehicle.
EV investors understand the importance of the development of solid-state batteries which can increase energy density per unit area, making them a critical component for vehicles. Recently, Mullen Automotive disclosed testing of its solid-state polymer cells indicates a driving range of over 600 miles while an 18-minute DC fast charge can yield a range of more than 300 miles.
Mullen Automotive is a pre-revenue company that reported a net loss of $36.5 million in Q4 of 2021. Its first electric vehicle may be available to investors by 2024 which suggests the company will have to raise capital several times to scale manufacturing capabilities going forward.
The final takeaway
It’s quite easy to pick a winner between the two. I believe Tesla’s market leadership, improving profit margins, and stellar growth rates make it a top investment right now.
Alternatively, there are significant risks to Mullen Automotive, given the company is expected to remain unprofitable in the near term. Mullen Automotive will have to increase equity capital several times to offset cash burn which could result in shareholder dilution and volatile returns.
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MULN shares were trading at $3.99 per share on Monday afternoon, up $1.09 (+37.57%). Year-to-date, MULN has declined -23.71%, versus a -6.55% 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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