Though there are a lot of supercharged growth opportunities for investors to choose from, the electrification of consumer vehicles and enterprise fleets is perhaps the most no-brainer opportunity to make money over the long run -- at least according to a select few Wall Street analysts.
Based on a report issued in November by Market Research Future, the aggregate market value of electric vehicles (EVs) is expected to grow by nearly 25% annually between 2022 and 2030. By the turn of the decade, it'll be nearing an estimated $1 trillion market value. This is the type of sustainable growth that could make patient investors a lot richer.
According to the lofty price targets issued by two Wall Street analysts, these well-known electric vehicle stocks offer up to 242% upside over the next year.
Two Rivian R1Ts climbing a trail. Image source: Rivian Automotive.
Rivian Automotive: Implied upside of 242%
If you're looking for true home-run potential in the EV space, the hottest initial public offering of 2021, Rivian Automotive (RIVN -3.45%), is the stock to consider. Piper Sandler analyst Alexander Potter recently lowered his firm's price target on Rivian by $18 a share. Nevertheless, the new target of $130 implies up to 242% upside relative to where Rivian's shares ended this past week.
The buzz surrounding Rivian can be boiled down to three catalysts.
First, long before the company went public, it landed a mammoth order for 100,000 electric vans from e-commerce kingpin Amazon. This September 2019 order validated Rivian as a force to be reckoned with in the EV space, as well as (presumably) gave the company an avenue to generate plenty of future cash flow.
Second, speaking of cash, Rivian ended the year with $18.4 billion in cash, cash equivalents, and restricted cash. Building an EV company from the ground up isn't cheap. Rivian is spending $5 billion alone on a manufacturing plant in Georgia that'll begin production in 2024 and yield 400,000 EVs annually. But having more than $18 billion on hand gives Rivian a much longer runway than most EV start-ups.
The third catalyst is the uniqueness of Rivian's EV lineup. In particular, the R1T pickup is effectively a luxury truck that's catered to people who love the outdoors. With little in the way of direct competition, optimists are banking on the R1T to be a serious moneymaker. Through March 8, Rivian had taken approximately 83,000 reservations for its R1 series vehicles (R1T truck and R1S SUV).
R1T door panels on an assembly line. Source: Rivian Automotive.
But reaching $130 a share could prove difficult, if not outright impossible, over the next year. Supply chain concerns that are affecting the entire auto industry are expected to keep Rivian's 2022 production around 25,000 EVs. Meanwhile, the company has estimated it would have produced closer to 50,000 EVs this year without supply chain constraints.
Rivian is also contending with public backlash following a recent announcement that it would be increasing prices on its EVs. Notably, the company tried to boost the price of the quad-motor models by $12,000 to account for higher material costs. Although it walked back price hikes for reservations made before March 1, the company genuinely risks pricing some buyers out of its vehicles with its latest increases.
Even after losing $125 billion in market value since its all-time high, Rivian still has a lot to prove.
Lucid Air production should total 12,000 to 14,000 units in 2022. Image source: Lucid Group.
Lucid Group: Implied upside of 96%
Another EV stock with massive upside potential is Lucid Group (LCID -4.12%). According to Citigroup analyst Itay Michaeli, Lucid can reach $45 a share, representing upside of 96%.
What makes Lucid so intriguing to investors is its potential to become the next Tesla. After watching Tesla make millionaires out of early investors, everyone wants to own the next Tesla of the EV space.
The Lucid Air sedan comes with a variety of upgrade options, can produce north of 1,100 horsepower, and will set buyers back anywhere from $77,000 to around $169,000. It's every bit a luxury EV sedan, and it's a direct competitor to the Tesla Model S. Even though Tesla's focus these days is on mass-producing the more affordable Model 3, Lucid is attempting to enter the EV market by riding Tesla's coattails and capturing demand from well-to-do buyers.
Similar to Rivian, there are tangible signs of promise for Lucid Group. The company noted in its year-end report that it had more than 25,000 reservations for its luxury sedans that could total over $2.4 billion in potential future sales.
Furthermore, it ended 2021 with approximately $6.2 billion in cash. While not as much capital as Rivian, $6.2 billion in cash gives Lucid plenty of breathing room to ramp up production at its Casa Grande manufacturing plant in Arizona. The company also recently announced plans to open a manufacturing facility in Saudi Arabia that could produce up to 150,000 EVs annually.
Image source: Lucid Group.
But this is another instance where hitting Wall Street's lofty price targets will prove challenging. Supply chain issues are also wreaking havoc on Lucid. The company's year-end report offered production guidance of 12,000 EVs to 14,000 EVs in 2022, which is well below a prior forecast of 20,000 EVs that were expected to be produced this year.
What's more, Lucid Group took a page out of Tesla's book (in a bad way) and pushed out the debut of its SUV, known as the Lucid Gravity. Initially expected to make its debut in 2023, the EV SUV is now expected by the first half of 2024. That's one less near-term catalyst, which makes it even more unlikely that Lucid sees $45 anytime soon.
My Foolish colleague Leo Sun also pointed out that Lucid's cash pile comes with a potential pitfall. Specifically, the company issued $1.75 billion in convertible debt in December to raise cash. Bulking up its debt may not prove wise for a company that looks to be years away from profitability.
