Rivian (RIVN 6.10%) and Nikola (NKLA 7.23%) were two of the market's hottest electric vehicle plays in 2020 and 2021. Rivian went public via a traditional IPO at $78 a share in November 2021, and its stock skyrocketed to a record high of $172.01 just a week later. Nikola went public by merging with a special purpose acquisition company (SPAC) in June 2020. Its stock opened at $37.55 on its first day as a combined company, then surged to its all-time high of $79.73 per share a week later.
But today Rivian stock trades at about $13, while Nikola's stock is worth about $1. The bulls retreated as both companies struggled with supply chain disruptions, delays, and persistent losses, while rising interest rates popped their bubbly valuations. Should investors buy either of these beaten-down EV stocks as a turnaround play?
Image source: Rivian.
Rivian still has a lot to prove
Rivian produces three types of vehicles: the R1T pickup truck, the R1S SUV, and an electric delivery van (EDV) for Amazon. Rivian's IPO gained a lot of attention from the bulls for three reasons: Amazon and Ford Motor Company were two of its largest backers, Amazon had already placed a long-term order for 100,000 of its EDVs, and it had already started to mass produce and deliver its vehicles.
During its IPO roadshow, Rivian claimed it could produce 50,000 vehicles in 2022. But it halved that target to 25,000 vehicles last March, then eventually missed that goal by only producing 24,337 vehicles. Like many other automakers, Rivian blamed its slowdown on chip shortages and other supply chain disruptions. It also suffered a series of recalls and faced safety-related complaints from some of its employees.
Rivian's disappointing slowdown and the collapse of its stock price drove Ford to liquidate most of its shares last year. Amazon stuck with Rivian, even though that investment caused it to post a net loss in 2022, but it also struck a deal with Stellantis to start buying its electric Ram ProMaster as a delivery vehicle in 2023.
Rivian claims it can produce at least 50,000 vehicles in 2023, while leaked internal conversations suggest it's aiming to produce as many as 62,000 vehicles. For the full year, analysts expect Rivian's revenue to rise 143% to $4 billion as it slightly narrows its net loss to $5.6 billion. Based on those expectations and its enterprise value of $8.2 billion, Rivian's stock looks fairly cheap at just over 2 times this year's sales.
Nikola faces tougher headwinds
Nikola produces battery-powered (BEV) trucks and hydrogen-powered fuel-cell (FCEV) trucks. It's also building a network of hydrogen charging stations that can recharge vehicles much faster than electric charging stations.
Nikola initially gained a lot of attention for two reasons: It merged with a SPAC run by former General Motors vice-chairman Steve Girsky, and it boldly claimed it could deliver 600 BEVs in 2021 and 1,200 BEVs in 2022. But like many other SPAC-backed EV makers, Nikola over-promised and under-delivered.
After failing to deliver a single vehicle in 2021, Nikola initially claimed it could deliver 300-500 BEVs in 2022. However, it broadly missed that target with just 131 deliveries. Its founder and former CEO Trevor Milton was also convicted of securities and wire fraud last October for inflating the company's growth forecasts to boost its stock price.
Nikola's CEO Michael Lohscheller has tried to distance the company from Milton since taking the helm this January. Yet winning back investors after all of those mistakes could be extremely challenging -- and a recent fire at the company's Phoenix headquarters (which it attributes to "foul play") doesn't inspire much confidence in its near-term future. Nikola also sold $100 million of its shares at a discount to its trading price earlier this year to shore up its liquidity.
For 2023, analysts expect Nikola to nearly triple its revenue to $148 million as it slightly narrows its net loss to $655 million. Based on those forecasts (which optimistically assume Nikola will finally stabilize and scale up its business) and its enterprise value of $10 billion, Nikola still looks surprisingly expensive at 10 times this year's sales.
The obvious winner: Rivian
Rivian has some obvious flaws, but it's clearly a better buy than Nikola. Rivian is already producing tens of thousands of vehicles as Nikola struggles to produce a few hundred trucks. Rivian hasn't suffered any brand-tarnishing scandals like Nikola, and it's still firmly backed by Amazon. To top it all off, Rivian's stock is still cheaper than Nikola's relative to its sales, and it isn't in danger of dipping below the $1 threshold like Nikola (which could result in its delisting from the Nasdaq).
