The electric vehicle (EV) industry is expected to grow at a rapid pace in the upcoming decade, as governments all over the world ramp up their efforts to shift towards clean energy solutions to fight climate change. While still at a nascent stage, the EV space is already attracting both new and legacy automobile manufacturers making this vertical somewhat crowded.
In 2021, EV stocks have trailed the broader markets, after a spectacular run in 2020, making EV stocks contrarian bets right now. Given that the EV industry will benefit from multiple secular tailwinds over the long-term, it might be a good time to expand your portfolio to include EV stocks.
Two EV stocks that have been garnering a lot of attention lately are Lordstown Motors (RIDE) and Lucid Group (LCID). Today I’ll analyze these two stocks to determine which is the better buy right now.
Lordstown Motors stock is down more than 80% from record highs
A pre-revenue company, Lordstown Motors manufactures EV trucks. Earlier this year the company claimed it received pre-orders to deliver 100,000 units to customers that will bring in $5 billion in revenue. Soon after, one of Wall Street’s most popular short-sellers, Hindenburg Research, accused Lordstown Motors of misleading investors and alleged the EV company’s pre-orders are fictitious. These orders were basically a marketing gimmick and the letters of interests were non-binding.
Lordstown Motors was expected to begin vehicle production last month but has been hit by issues that include management irregularities and changes to vehicle designs. This meant the stock is down 84% from all-time highs, valuing the company at a market cap of $866 million.
In the second quarter of 2021, the company disclosed it lost $108 million and ended Q2 with just $366 million in cash.
The company now expects its EV trucks to be delivered in the second half of 2022 which will be manufactured by Foxconn. Lordstown was expected to benefit from a first-mover advantage as it is targeting the commercial EV space. Now, it will have to compete with established players such as Ford (F), an automobile giant that is looking to launch its commercial electric vehicles in mid-2022.
Lucid Group is down 60% from record highs
Lucid Group is also a pre-revenue company valued at a market cap of $38.4 billion. Considered a direct competitor to Tesla (TSLA), Lucid Group began the production of the Lucid Air vehicles recently. The Lucid Air Dream Edition is priced at $169,000.
At the end of July, the company had a cash balance of $4.4 billion which gives it enough runway to fund its operations till the end of 2022. LCID stock is already overpriced given its market cap, but it might gain momentum if it is successful in capturing market share from Tesla and other EV manufacturers.
Last month, the U.S. Environment Protection Agency gave Lucid a range rating of 520-miles which is the highest in the EV industry, according to the company’s CEO.
When you compare Lucid Group with Lordstown Motors, it’s quite evident that there is only one winner. Despite Lucid stock’s steep valuation, it is a much better investment compared to Lordstown, given that the latter is struggling with production delays, cash burn, a weak balance sheet, and much more.
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RIDE shares were trading at $4.89 per share on Friday afternoon, down $0.15 (-2.98%). Year-to-date, RIDE has declined -75.62%, versus a 18.50% 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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