Better Buy for 2022: Rivian vs. Tesla

NASDAQ: TSLA | Tesla, Inc. News, Ratings, and Charts

TSLA – Today I’ll analyze and compare Tesla (TSLA) and Rivian Automotive (RIVN) to determine which electric vehicle stock is currently a better buy.

With the increasing demand for low emission vehicles, along with government benefits for electric vehicle (EV) buyers, the global EV market should hit $823.75 billion by 2030, registering a CAGR of 18.2% during the forecast period. 

In addition, the current increase in gasoline prices acts as one of the growth catalysts for the EV industry, thus accelerating the transition toward EVs and plug-in vehicles. Notably, global electric car sales hit 851,000 units in March 2022, representing a 60% year-over-year increase, with a market share of 15%. Also, China’s EV sales stood at 458,000 in March 2022, up 118% compared to a prior-year period.

With this in mind, I am going to analyze and compare two EV stocks, Tesla, Inc. (TSLA) and Rivian Automotive, Inc. (RIVN), to determine which one presents a better buying opportunity for the rest of the year. 

TSLA, a pioneer of the EV industry, produces and sells electric vehicles as well as energy generation and storage systems across the globe. It operates through two key segments: RIVN develops and manufactures electric pickup trucks and sports utility vehicles. RIVN went public through a traditional IPO on November 10th, 2021, by offering 153 million shares at $78.00 per share.

Year-To-Date (YTD), shares of Tesla dropped about 10%, and RIVN plunged 67% over the same period.  

Recent Developments 

On April 22nd, Deutsche Bank analyst Emmanuel Rosner increased the price target on TSLA stock to $1,250 from $1,200, keeping a “Buy” rating. The firm noted the company’s strong Q1 beat, superior profitability levels in a severe environment, and strong demand with an effective pricing model. Although the company’s second-quarter performance can be affected by the COVID shutdowns in Shanghai, the analyst believes that Tesla will be able to achieve about 1.5 million units delivery in FY2022.

On April 5th, Rivian Automotive announced that it had produced 2,553 EVs at its manufacturing facility in Normal, Illinois during the first quarter of 2022. Besides, the company delivered 1,227 vehicles in Q1. RIVN plans to produce 25,000 vehicles in FY22.

Recent Financial Performance & Analysts’ Estimates 

On April 20th, Tesla filed its first-quarter earnings report. In Q1, Tesla’s total revenue increased 80.6% year-over-year to $18.76 billion, caused primarily by an 89% year-over-year increase in Automotive sales to $15.51 billion due to a rise of 111,915 Model 3 and Model Y cash deliveries, and an increase of 10,305 Model S and Model X cash deliveries. As a result, Tesla easily surpassed revenue estimates by $920 million. The biggest EV maker posted a Non-GAAP EPS of $3.22, beating Wall Street estimates by $0.95.

It is also important to note that the company improved its total automotive gross margin by 636 bps year-over-year to 32.9%, primarily due to the effective cost reduction despite inflationary pressures. In Q1, its total GAAP gross margin increased to 29.1% versus 21.3% as of 1Q2021.

For the next quarter, analysts expect TSLA’s EPS to be $2.27, up 56.42% year-over-year. Moreover, analysts project its FQ2 2022 revenue to grow by 53.03% YoY to $18.30 billion. 

On March 10th, Rivian Automotive posted its fourth-quarter earnings report. For the fourth quarter ended December 31st, 2021, the company’s total revenue stood at $54 million, missing consensus by $6.72 million. In addition, the company revealed a GAAP EPS of ($4.83), missing Wall Street projections by $2.47. 

Notably, its Adjusted EBITDA loss has been reported at $1.11 billion compared to ($341 million) in Q4 2020. Moreover, Rivian plans to deliver an Adjusted EBITDA loss of $4.75 billion in 2022 amid continued forward investment in its ecosystem.

Wall Street analysts expect Rivian’s earnings to be ($1.66) in the first fiscal quarter of 2022. Its revenue for the FQ1 is expected to come in at $128.74 million.

Comparing Options Market Sentiment

Taking a look at the May 20th, 2022 option chain for both TSLA and RIVN, we can determine options market sentiment by analyzing the open interest levels. In TSLA’s case, the open calls/open puts ratio at the $955.00 strike price is 2.05x, showing a bullish options market sentiment. For Rivian, the open calls/open puts ratio at the $34.00 strike price stands at 0.62x, implying a bearish market sentiment.  

Conclusion 

I believe that TSLA is a better investment than RIVN at the moment. The company is a clear industry leader in the EV space. It delivered superb higher-than-expected first-quarter figures with further margin improvements. It is worth mentioning that the company’s price target was recently upgraded at Deutsche Bank. Finally, TSLA’s growth prospects look promising, and it has a relatively better options market sentiment.   


TSLA shares were trading at $914.87 per share on Thursday morning, down $37.75 (-3.96%). Year-to-date, TSLA has declined -13.43%, versus a -11.28% rise in the benchmark S&P 500 index during the same period.


About the Author: Oleksandr Pylypenko


Oleksandr Pylypenko has more than 5 years of experience as an investment analyst and financial journalist. He has previously been a contributing writer for Seeking Alpha, Talks Market, and Market Realist. More...


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