Tesla, certainly one of the biggest corporations on the earth with a market cap above $1 trillion, still stays a viable investment opportunity. But investors who appropriately discover the subsequent Tesla could stand to make the best gains investing in electric vehicle (EV) stocks.
Quite just a few metrics suggest Lucid Group(NASDAQ: LCID) possibly being the diamond within the rough that you simply’re in search of, even when you’ve got as little as $200 to speculate straight away. Why? Because the whole business continues to be valued below $10 billion, though it doesn’t take much imagination to see the EV company in the future being value a minimum of $100 billion.
But before you jump in, be sure you understand two things in regards to the company.
Despite a big sales increase since 2021, most of Lucid’s growth journey stays ahead of it. That is mostly because EV sales within the U.S. remain only a sliver of overall automotive sales.
Based on data compiled by the U.S. Energy Information Agency, just 7% of U.S. automotive sales are currently electric models. That is down from a peak of 8% in 2024, but still up considerably from 1% in 2018.
Where are EV sales going from here? Analyst expectations are in every single place, but nearly every prediction trends in the identical direction: up.
S&P Global, for example, believes that despite some struggles in 2024, the subsequent few years should prove seismic for each EV production and demand. “The auto industry’s transition to EVs is accelerating,” a recent report by the organization says.
That report predicts 2026 might be a tipping point for EV demand, resulting in 25% of cars sold within the U.S. to be electric by 2030. So if S&P Global is correct, EV sales should greater than triple over the subsequent five years.
In some ways, Lucid is in the appropriate place at the appropriate time. The failures of an extended list of EV makers were largely attempts to compete in a world where demand was minimal — below 1% of total automotive sales.
Today, EVs have a foothold available in the market, and most of the people know someone who owns one, in the event that they don’t own one themselves. And as most forecasts predict, this foothold will only strengthen over time. Not are we waiting for the EV market to take shape — it’s already here, with loads of growth still ahead of it.
Lucid has done a commendable job maintaining with demand. Its sales grew by roughly 70% 12 months over 12 months last quarter after growing by around 90% the quarter before.
For 2024, analysts expect companywide sales to be $778 million. For this 12 months, nevertheless, they predict a 118% increase in sales, reaching $1.69 billion.
Fueling this growth is its Air sedan, and its latest Gravity SUV, which just began production just a few months ago. These two models are priced between $70,000 and $100,000, depending on options.
So while the corporate cannot tap the mass market yet, it has proved capable of manufacturing high-end luxury models with enough buyer appeal to guide to greater than $1 billion in sales in a single 12 months.
Lucid is on a promising trajectory. It now has two luxury EV models in production, and its sales base is predicted to grow significantly in 2025 alongside increasing industry demand for EVs overall, a trend that will not stop for potentially several many years. But there’s one number I will be paying close attention to on Feb. 25, the subsequent time Lucid reports quarterly earnings: gross margins.
Resulting from Lucid’s rapid sales growth, the market has assigned it a premium valuation of 10 times sales. Tesla, for instance, trades closer to 14 times sales, while fellow EV maker Rivian trades at just 3.3 times sales.
There are a lot of differences amongst these three corporations, but perhaps the largest is their various ability to generate profits on each automotive they sell. Tesla has generated positive gross margins for over a decade. Rivian has struggled to attain positive gross margins despite $5 billion in sales last 12 months.
As a smaller competitor, Lucid gets the advantage of the doubt for now. But should you do jump into this growth stock, monitor its profitability closely. Over the subsequent few quarters, expect to see its gross margins trend closer to where Rivian is today.
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Ryan Vanzo has no position in any of the stocks mentioned. The Motley Idiot has positions in and recommends Tesla. The Motley Idiot has a disclosure policy.
