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Growth stocks are the holy grail of investing: highly desirable but hard to find.
Global data forecasts that the electric vehicle (EV) market will grow at an annual rate of 15.9% between 2023 and 2035. I wonder which companies are best positioned to benefit from this.
tesla
tesla (NASDAQ:TSLA) shares are currently changing hands at the price they were in June 2023.
Four months without growth is worrying for a company that built its reputation by delivering exceptional returns to its shareholders.
The company’s latest figures are also disappointing.
It delivered 435,059 cars in the third quarter of 2023, 4.7% less than expected.
Tesla is also cutting prices across its range. He did it in March 2023 and has decided to do it again. As an example, the list price of your basic. Model 3 was reduced by $2,000 earlier this year and an additional reduction of $1,250 was just announced.
Although this could increase the number of cars sold (and hurt some of its rivals), it is not clear whether this additional revenue will offset the loss of profits.
But Tesla remains the world’s most valuable electric vehicle maker. It has a market capitalization of $837 billion, compared to China’s $36 billion. Auto Liwhich occupies second place.
There are other major manufacturers that make both conventional and electric vehicles. But none of them have higher valuations than Tesla.
And that has always been a problem for me.
According MacrotrendsTesla currently has a P/E ratio of 73, making it very expensive, although it has been higher.
rivian
I have always liked the fact that Rivian Automotive (NASDAQ:RIVN) is currently producing more vehicles than Tesla at the same stage. And its trucks and vans are better looking than anything its larger rival makes.
But my trust in the company has been affected.
On August 9, 2023, its CEO said Bloomberg: “The cash we have has put us in a position to not need capital until the end of 2025.“.
However, 57 days later, the company announced plans to raise $1.5 billion through convertible notes.
Not surprisingly, investors reacted badly and its shares closed down 22% on October 5, 2023.
But in the third quarter of 2023, deliveries were 15,564, 11% more than the average analyst forecast.
The fundraising aims to reduce the risk of launching the R2 sport utility vehicle, but it has become a public relations disaster.
Alternatives
With the brilliance of these two manufacturers, I wonder what the next high-growth EV stock could be.
Of the 10 most valuable, nine are relatively small, producing no more than 150,000 vehicles a year.
And yet, some of their valuations are even more astronomical than Tesla’s.
VinFast Auto of Vietnam produced only 11,315 cars during the first half of 2023. But it is valued at 18 billion dollars!
Verdict
If I had to pick the best EV growth stock, I’d still pick Rivian. But I don’t like it enough to buy shares. I think it’s the best of an expensive group.
The recent drop in its share price could be a buying opportunity. But I have lost confidence in the management.
Therefore, I am going to wait until the company’s financial situation becomes clearer before deciding whether to invest or not.