What happened
It's not been a good week for stocks, as the S&P 500 approaches a weekly loss of 3% as of Thursday afternoon. Technology stocks have declined even more, with the Nasdaq Composite down 3.4% so far this week. That helps explain why money-losing electric vehicle (EV) stocks like Rivian Automotive (RIVN 2.44%), Lucid Group (LCID 0.18%), and Blink Charging (BLNK 5.19%) are moving down by double digits.
As of Thursday afternoon trading Rivian and Blink Charging had dropped about 10% this week, while Lucid sank about 15%, according to data provided by S&P Global Market Intelligence. Those double-digit drops make it a good time to see if the stocks are dropping from panicked investors, or if there are fundamental reasons why they should be lower.
So what
The reality is investors know these names aren't very close to profitability, and trade on their potential. EV sales are growing fast, but there will be winners and losers. If investors can buy the dips on the eventual winners, those investments will likely pay off.
Image source: Rivian Automotive.
When Rivian reported its third-quarter results last month, investors were glad to hear the company reaffirm its plan to produce 25,000 vehicles this year. Its order backlog had also continued to grow. Preorders for its consumer pickup truck and SUV offerings reached 114,000 as of Nov. 7, 2022. That's an increase of more than 60% from December of last year not long after production began.
That helps explain why the decline in Rivian shares over the past month is much less than Lucid's nearly 40% drop. Lucid actually reported a reduction in its backlog as customers canceled orders for its luxury EV sedans.
Now what
Lucid also reiterated it plans to meet its previously lowered projections for 2022 production levels. But that hasn't helped investors gain confidence this week when reports emerged that the company was offering discounts to try to bolster demand. After Lucid's order backlog dropped nearly 10% in the three months from June to September, it has started offering discounts to both employees and customers who had canceled orders, according to a Barron's report.
In another contrast between the two EV start-ups, the report noted that used Rivian trucks are selling at a premium to list price, while the opposite is true for Lucid sedans. That's a strong indication of demand.
The lesson for investors is to study the company and its underlying business fundamentals when stocks go down. Whether it's Blink Charging working to grow its charging network, or manufacturers like Rivian and Lucid, if the business looks strong, a sharp drop in the stock price could represent a good opportunity. Rivian looks like one that could fit in that category right now.
