Nobody can predict when the stock market will crash. But savvy investors know that market crashes often present a great opportunity to buy quality stocks. The best stocks, which otherwise trade at significant premiums, can sometimes be bought at bargain prices during a market correction.
Growth stocks, which are perceived to be riskier, tend to fall the most during a crash. Here are three top growth stocks in the electric vehicle (EV) sector to buy if markets crash in 2022.
The Tesla 2022 Roadster. Image source: Tesla.
1. Tesla
After Tesla's (TSLA 4.30%) success, investors flocked to its stock, sharply increasing its valuation. The stock price is up 1,655% in the past five years, and that is despite trading off nearly 29% from its 52-week high. So some might consider the stock is already trading at discount-level pricing. Much depends on the individual investor's view on Tesla's potential for future growth. A broad market crash could make the entry point in this hot stock even better for investors who feel they might have missed the boat on this stock. Though investors are divided on whether Tesla's $1 trillion valuation makes sense or not, most agree that the EV maker has solid growth potential.
TSLA Market Cap data by YCharts
In 2021, Tesla's vehicle deliveries grew 87% over 2020 to 936,172 vehicles. Investors will be closely watching the company's margins when it reports earnings on Wednesday, Jan. 26. Tesla reported strong margins in the last two quarters.
TSLA Profit Margin (Quarterly) data by YCharts
Tesla, which sold fewer than a million vehicles last year, has a lot of room to grow its deliveries. For perspective, Toyota sold nearly 10 million vehicles last year, while Volkswagen sold nearly 9 million units.
Notably, Tesla's margins may come down over time as legacy automakers increase their EV sales in the coming years. That may negatively impact Tesla stock's valuation. Investors who believe in Tesla's long-term growth, but feel the stock is overvalued, may find an opportunity to buy the stock during a market crash.
Image source: Lucid Group.
2. Lucid Group
Lucid Group (LCID -3.92%) has managed to make its presence felt in the competitive EV space. The company started delivering vehicles in October and has yet to report its delivery numbers for the fourth quarter.
Though Lucid started delivering cars only recently, its EV batteries have long been used by cars in EV racing series Formula E. Superior technology and a sleek design helped Lucid's Air model win the 2022 MotorTrend Car of the Year award. Its EV technology also allowed Lucid to deliver the longest-range electric vehicle in the market.
Attractive features and designs resulted in a positive customer response, and Lucid got more than 17,000 reservations for its cars by mid-November. The company expects to deliver 20,000 vehicles in 2022.
Lucid stock rose significantly in the last year. Investors will surely want to scoop up some shares if the stock's price falls due to a market crash.
Image source: Rivian.
3. Rivian
As of this writing, Rivian's (RIVN -3.45%) stock price has fallen nearly 21% below its early November initial public offering price of $78 a share. The stock is down more than 65% from its 52-week high set in mid-November. The price correction has made Rivian's valuation a bit more reasonable.
Rivian's electric pickup truck has been well-received and has won MotorTrend's 2022 Truck of the Year award. So far, the company has received more than 71,000 pre-orders for its R1 trucks and SUVs. Additionally, Amazon has placed an order of 100,000 electric delivery vans from the company. Rivian delivered 920 vehicles in 2021.
Though there is a lot to like about Rivian, intense competition may limit Rivian's growth. Ford Motor Company will start selling its F-150 Lightning electric trucks soon. Most major automakers have launched, or are planning to launch, electric pickup trucks in the coming months. Rivian faces competition in the electric delivery van segment as well.
Overall, though Rivian has proven that it can produce quality vehicles, it has yet to prove that it can sell them profitably. A market crash may finally bring Rivian's price to an attractive buy level that better matches where the EV company currently stands in its development.
