When it comes to electric vehicles (EVs), there is one name in particular that comes to mind: Tesla. Although Tesla is the undisputed leader in EV adoption, there are a number of others that compete with Elon Musk's car company.
To start, traditional automobile manufacturers, such as Ford and General Motors, are beginning to make a splash in EVs. However, there are also some under-the-radar names that could be worth a look for your portfolio.
In this article, I will be analyzing Rivian Automotive (RIVN 6.10%) and Polestar Automotive (PSNY 0.85%), both of which are quietly setting records and becoming more prominent names in the EV market.
The supply and demand story is clear
Generally speaking, investors must wait for a company's earnings report to learn how it performed during a given quarter. However, something interesting that Tesla does is that it publishes its production and delivery data a couple of weeks before formally issuing its financial results. This is a nice proxy for investors to get a glimpse of how the company may have performed before seeing its full financial report.
Both Rivian and Polestar have adopted this practice, following Tesla's lead. In 2022 Rivian produced 24,337 vehicles and delivered 20,332. Management issued a lofty goal for 2023, declaring that Rivian was aiming to produce 50,000 vehicles in 2023, more than double last year.
Unfortunately, Rivian's first-quarter 2023 results were disappointing. The company produced 9,395 vehicles and delivered 7,946 for the quarter ended March 31. And while management reiterated its prior forecast of producing 50,000 vehicles, the stock skidded on the results. However, the company recently released production and delivery results for the second quarter, and the stock is beginning to bounce back.
For the quarter ended June 30, Rivian produced 13,992 vehicles and delivered 12,640. Through the first six months of 2023, Rivian has produced more than 23,000 vehicles. That's almost as many vehicles as the company produced in all of 2022. Furthermore, this fellow Fool astutely pointed out that Rivian's deliveries are increasing in tandem with its production. This is a basic way to imply that the company's cars are in demand and that Rivian is not facing too much difficulty selling the vehicles it produces.
Polestar followed Rivian's lead with some big news of its own. On July 6, Polestar announced that the company achieved a record for any second quarter. Polestar delivered 15,800 vehicles in Q2, which represents a 36% increase over the same period last year. Moreover, the company delivered a record 27,900 vehicles during the first six months of 2023. Per Polestar's management, the company is on pace to deliver between 60,000 and 70,000 vehicles in 2023. Taking the midpoint of 65,000 vehicles, this would imply 26% growth over 2022.
Image source: Getty Images.
Don't let the stock charts distract you
Both Rivian and Polestar are polarizing stocks to own. Unlike Ford or General Motors, these are not blue chip investments. At best, the companies will continue to meet and exceed production targets, gain share in the EV market, and reach consistent profitability. At worst, it's akin to investing in a speculative start-up, given the risk-reward profiles.
Rivian went public in late 2021 and soared to a valuation north of $100 billion. To make matters worse, at the time, the company was essentially pre-revenue. For this reason alone, analyzing Rivian's historical stock chart can be challenging. The stock is down more than 80% since its initial public offering (IPO), which seems appropriate given how quickly and illogically it rose after hitting the public markets.
The thing is, in 2022, Rivian generated $1.7 billion in total revenue. That's pretty impressive, considering the year prior, the company had little to show in terms of sales. However, for the past year, the stock has continued to slide due to lukewarm investor sentiment. Another way of saying this is that even though Rivian has illustrated that it can meet its production forecasts and that the business is expanding, the quarterly trends have caused some investors to panic-sell at the first instance of sub-optimal news.
When it comes to Polestar, investors should be aware that the company is certainly guilty of publishing lofty production estimates in presentations before going public. According to a pre-IPO investor presentation, Polestar initially estimated that it would produce 29,000 cars in 2021 and 65,000 in 2022. Given the results above, it's clear that Polestar is at least a year behind on production targets.
After its IPO in May 2021, Polestar's stock rose from roughly $10 per share to $14 per share in less than four months. Unfortunately, the stock is down more than 50% during the past 12 months and is hovering near an all-time low.
While both companies clearly benefited from some euphoria and hype around EVs, the stocks have not only cratered but stayed at low prices. Despite overcoming some initial hurdles, it seems that both companies may have lost some trust and that investors are wary about jumping back in -- until now.
Best way to play it
Although Rivian and Polestar still have a long way to go, it is encouraging to see both companies turning a corner. It is easy to get bogged down by the companies' lack of profitability. However, long-term investors should keep in mind that it also took Tesla quite some time to report consistent profits.
Since releasing production results on July 3, Rivian stock is up nearly 16% in just a few trading days. Similarly, Polestar rose 5% on the same day it released second-quarter production results. With Polestar trading just above a 52-week low and Rivian trading right between its 52-week range, both of these stocks present an interesting buying opportunity. In a way, each could be viewed as a hedge to an investment in Tesla.
Investors looking for exposure to electric vehicles, but who don't want to own one particular stock, could view Rivian and Polestar as a nice way to balance out a basket of EV stocks in their portfolios. As long as Rivian and Polestar continue to meet or exceed expectations, bullish Wall Street sentiment should eventually follow. The prudent approach for long-term investors is to dollar-cost average and be sure to assess future earnings reports and production results.
