Nikola (NKLA +0.00%) disappointed a lot of investors after it went public by merging with a special purpose acquisition company (SPAC) four years ago. The maker of electric semi trucks repeatedly missed its own delivery estimates, its founder and former CEO Trevor Milton was convicted of securities and wire fraud, and it recalled nearly all of its vehicles after a series of battery fires. It has also nearly tripled its share count over the past four years to raise more cash.
In 2023, Nikola only delivered 79 battery-powered electric semi trucks (BEVs) and 35 hydrogen-powered fuel cell trucks (FCEVs). That was well below the 3,500 BEVs and 2,000 FCEVs it originally claimed it could deliver in 2023 in its pre-merger presentation. It only generated $36 million in revenue during the year, but it racked up a net loss of $966 million. That equals an average net loss of $8.5 million per vehicle delivered.
Image source: Li Auto.
Nikola's stock has already plummeted 99% from its all-time high, but it still has an enterprise value of $708 million. That's still more than 4 times the "$150 million to $170 million" in total truck revenue it expects to generate in 2024. Analysts expect it to post a net loss of $498 million for the year, which is a grim situation for a company that ended its latest quarter with $346 million in cash and equivalents. So instead of betting on Nikola's long-shot recovery, investors should consider investing in a Chinese EV maker that has a much brighter future: Li Auto (LI +5.31%).
NASDAQ: LI
Key Data Points
Why is Li Auto a better buy than Nikola?
Li initially sold plug-in hybrid electric SUVs, but it launched its first battery-powered electric vehicle (EV), the Li Mega minivan, earlier this year. Its SUVs start at around $35,000, while its Mega minivan costs approximately $78,000.
Li Auto started to deliver its first vehicles in 2019, and its deliveries skyrocketed over the following three years. Things cooled off in 2022 as the Chinese EV industry faced tougher supply chain, macro, and competitive headwinds, but its growth accelerated again in 2023 after overcoming most of those challenges. Its vehicle margin also hit a record high during the year, which suggests its focus on the niche PHEV space insulated it from the ongoing price war across China's EV market.
|
Metric |
2020 |
2021 |
2022 |
2023 |
|---|---|---|---|---|
|
Deliveries |
32,624 |
90,491 |
133,246 |
376,030 |
|
Growth |
N/A* |
177% |
47% |
182% |
|
Vehicle margin |
16.4% |
20.6% |
19.1% |
21.5% |
Data source: Li Auto. *Started deliveries in December 2019.
Li's robust sales growth and expanding margins enabled it to turn profitable on a generally accepted accounting principles (GAAP) basis in 2023. For 2024, analysts expect its revenue to increase 24% as it continues to deliver more vehicles. However, they forecast its EPS to decline 31% as it ramps up its Mega shipments, scales up its production capabilities, launches fresh marketing campaigns, and expands its nationwide network of first-party chargers.
But in 2025, analysts expect Li's revenue and EPS to rise 45% and 71%, respectively, as it reaps the benefits from those investments amid a better macro environment. We should take those estimates with a grain of salt, but Li's stock looks dirt cheap at 18 times forward earnings and less than 1 times this year's sales.
Is it the right time to buy Li Auto's stock?
Li trades at such a low valuation because the escalating tech and trade tensions between the U.S. and China are driving many investors away from Chinese equities. But if you believe the two sides can eventually resolve their differences peacefully, then it might be a great time to buy Li's stock while the bulls are still looking the other direction.
