Higher EV Inventory: Rivian Automotive vs. Nikola

Rivian (RIVN -0.67%) and Nikola (NKLA -13.57%) had been two of the market’s hottest electrical car performs in 2020 and 2021. Rivian went public by way of a conventional IPO at $78 a share in November 2021, and its inventory skyrocketed to a report excessive of $172.01 only a week later. Nikola went public by merging with a particular function acquisition firm (SPAC) in June 2020. Its inventory opened at $37.55 on its first day as a mixed firm, then surged to its all-time excessive of $79.73 per share every week later.

However right this moment Rivian inventory trades at about $13, whereas Nikola’s inventory is value about $1. The bulls retreated as each corporations struggled with provide chain disruptions, delays, and protracted losses, whereas rising rates of interest popped their bubbly valuations. Ought to traders purchase both of those beaten-down EV shares as a turnaround play?

Rivian nonetheless has quite a bit to show

Rivian produces three kinds of autos: the R1T pickup truck, the R1S SUV, and an electrical supply van (EDV) for Amazon. Rivian’s IPO gained a number of consideration from the bulls for 3 causes: Amazon and Ford Motor Firm had been two of its largest backers, Amazon had already positioned a long-term order for 100,000 of its EDVs, and it had already began to mass produce and ship its autos.

Throughout its IPO roadshow, Rivian claimed it may produce 50,000 autos in 2022. However it halved that concentrate on to 25,000 autos final March, then ultimately missed that objective by solely producing 24,337 autos. Like many different automakers, Rivian blamed its slowdown on chip shortages and different provide chain disruptions. It additionally suffered a collection of recollects and confronted safety-related complaints from a few of its workers.

Rivian’s disappointing slowdown and the collapse of its inventory worth drove Ford to liquidate most of its shares final yr. Amazon caught with Rivian, though that funding prompted it to publish a internet loss in 2022, but it surely additionally struck a cope with Stellantis to begin shopping for its electrical Ram ProMaster as a supply car in 2023.

Rivian claims it might probably produce at the least 50,000 autos in 2023, whereas leaked inside conversations recommend it is aiming to supply as many as 62,000 autos. For the total yr, analysts count on Rivian’s income to rise 143% to $4 billion because it barely narrows its internet loss to $5.6 billion. Primarily based on these expectations and its enterprise worth of $8.2 billion, Rivian’s inventory appears to be like pretty low-cost at simply over 2 instances this yr’s gross sales.

Nikola faces more durable headwinds

Nikola produces battery-powered (BEV) vans and hydrogen-powered fuel-cell (FCEV) vans. It is also constructing a community of hydrogen charging stations that may recharge autos a lot quicker than electrical charging stations.

Nikola initially gained a number of consideration for 2 causes: It merged with a SPAC run by former Common Motors vice-chairman Steve Girsky, and it boldly claimed it may ship 600 BEVs in 2021 and 1,200 BEVs in 2022. However like many different SPAC-backed EV makers, Nikola over-promised and under-delivered.

After failing to ship a single car in 2021, Nikola initially claimed it may ship 300-500 BEVs in 2022. Nevertheless, it broadly missed that concentrate on with simply 131 deliveries. Its founder and former CEO Trevor Milton was additionally convicted of securities and wire fraud final October for inflating the corporate’s development forecasts to spice up its inventory worth.

Nikola’s CEO Michael Lohscheller has tried to distance the corporate from Milton since taking the helm this January. But successful again traders in any case of these errors might be extraordinarily difficult — and a current fireplace on the firm’s Phoenix headquarters (which it attributes to “foul play”) would not encourage a lot confidence in its near-term future. Nikola additionally bought $100 million of its shares at a reduction to its buying and selling worth earlier this yr to shore up its liquidity.

For 2023, analysts count on Nikola to almost triple its income to $148 million because it barely narrows its internet loss to $655 million. Primarily based on these forecasts (which optimistically assume Nikola will lastly stabilize and scale up its enterprise) and its enterprise worth of $10 billion, Nikola nonetheless appears to be like surprisingly costly at 10 instances this yr’s gross sales.

The plain winner: Rivian

Rivian has some apparent flaws, but it surely’s clearly a greater purchase than Nikola. Rivian is already producing tens of hundreds of autos as Nikola struggles to supply a couple of hundred vans. Rivian hasn’t suffered any brand-tarnishing scandals like Nikola, and it is nonetheless firmly backed by Amazon. To prime all of it off, Rivian’s inventory continues to be cheaper than Nikola’s relative to its gross sales, and it is not in peril of dipping beneath the $1 threshold like Nikola (which may lead to its delisting from the Nasdaq). 

John Mackey, former CEO of Complete Meals Market, an Amazon subsidiary, is a member of The Motley Idiot’s board of administrators. Leo Solar has positions in Amazon.com. The Motley Idiot has positions in and recommends Amazon.com. The Motley Idiot recommends Common Motors and Nasdaq and recommends the next choices: lengthy January 2025 $25 calls on Common Motors. The Motley Idiot has a disclosure coverage.