While many stocks in the electric vehicle (EV) industry have cooled off in 2021, they still remain solid long-term investments, given the worldwide shift towards clean energy solutions and a rapidly expanding addressable market.
According to a research report from Allied Market Research, the global electric vehicle market was valued at $162.34 billion in 2019 and is forecast to touch $802.81 billion by 2027, indicating a compound annual growth rate of 22.6% in this period.
So, the recent pullback provides investors an opportunity to buy quality growth stocks at a lower multiple. Keeping these factors in mind, let’s see which between Tesla (TSLA) and Lucid Group (LCID) is a better EV stock right now. While the former is an established player and a market leader, the latter is just starting to take off.
Tesla just reported stellar Q2 results
Last month, Tesla disclosed its second-quarter results and reported sales of almost $12 billion. Its adjusted earnings per share stood at $1.45. Analysts tracking the stock forecast sales of $11.21 billion and earnings of $0.96 per share in Q2.
The EV giant manufactured and delivered 200,000 vehicles in Q2 while achieving an operating margin of 11% in the quarter. Its GAAP net income surpassed the $1 billion mark for the first time ever despite supply chain challenges that have impacted vehicle production.
Tesla confirmed it plans to grow manufacturing capacity in the upcoming months allowing it to achieve annual growth of 50% in terms of vehicle deliveries in 2021. Comparatively, in 2020, Tesla delivered close to 500,000 units and in the first two quarters of 2021, it has already delivered 386,000 vehicles.
Tesla has sufficient liquidity to fund its product roadmap as well as capacity expansion plans. This in turn will allow the company to improve its operating margin over time and benefit from economies of scale.
Tesla stock has been on an absolute tear in the last decade and has returned a staggering 12,270% since August 2011. This means that the stock is trading at a frothy valuation. Given its market cap of $702 billion, Tesla has a forward price to sales multiple of 14.08x and a price to earnings ratio of 132.45x.
Lucid Motors went public in July 2021
A company valued at a market cap of $38.5 billion, Lucid Motors went public via a SPAC merger with Churchill Capital Corp. Lucid Motors raised $4.4 billion in this transaction which will be deployed to increase its manufacturing capacity.
A press release claims Lucid Air has over 11,000 paid reservations and the company is on schedule to deliver this luxury EV in the second half of 2021. Lucid Air is projected to have a range of more than 500 miles on a single charge.
The above-mentioned vehicle reservations will help the company derive around $1 billion in sales. It currently has an annual manufacturing capacity of 34,000 vehicles and Lucid Motors aims to increase this to 365,000 units in the upcoming years.
It’s difficult to compare the valuation of Tesla and Lucid Motors due to the low earnings and revenue visibility of the latter. Lucid Motors is pre-revenue making it a high-risk investment. However, we have also seen that early Tesla investors have experienced their wealth increase at an exponential rate and the same might be true for Lucid Motors stock.
However, for more conservative investors, like myself, it makes sense to place your bets on Tesla due to its leadership position, increase in manufacturing capacity, and improving profit margins.
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TSLA shares were trading at $707.40 per share on Tuesday morning, down $2.27 (-0.32%). Year-to-date, TSLA has gained 0.25%, versus a 17.84% 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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