Tesla vs. Lordstown Motors: Which Electric Vehicle Stock is a Better Buy?
Companies in the electric vehicle (EV) space delivered big gains to investors in 2020. But for 2021, should one bet on an EV market leader Tesla (TSLA), which has concrete plans for growth and anticipates building 50% more vehicles this year than last, or gain exposure to emerging player Lordstown Motors (RIDE), which is still at a pre-revenue stage but is trading at an attractive multiple and for which analyst forecast massive growth in 2022? Let’s discuss.
Companies in the electric vehicle (EV) space delivered big gains to investors in 2020. But for 2021, should one bet on an EV market leader Tesla (TSLA), which has concrete plans for growth and anticipates building 50% more vehicles this year than last, or gain exposure to emerging player Lordstown Motors (RIDE), which is still at a pre-revenue stage but is trading at an attractive multiple and for which analyst forecast massive growth in 2022? Let’s discuss.
Companies in the electric vehicle (EV) spacedelivered big gains toinvestors in 2020. And investors and analysts continue to be bullish on this sectorfor good reason. According to a report from EV-volumes.com, the number of EVs sold in 2020 increased by 43% to 3.34 million units, up from 2.26 million units in 2019.
EVs are now expected to account for 10% of global passenger vehicle sales by 2025, a figure that couldgrow to 58% by 2040.
Given the rapidly expanding market, let’s compare one market leader in the EV space—Tesla (TSLA)—with an emerging player—Lordstown Motors (RIDE)—and analyze which stock is a better buy right now.
Tesla stock hasa market cap of $674 billion, indicatinga forward price to sales multiple of 13.6. Thisis verysteep for an automobile company. But Tesla is no ordinary enterprise. With a visionary CEO at the helm, Tesla is a market leader in this highly disruptive sector.
In the first quarter of 2021, Tesla delivered 184,000 vehicles, up from the 88,400 in the prior-year period. Over the past decade, Tesla hasmanaged to scale operations andexpand its product portfolio andtime between battery recharges for its vehicles.
In 2020, Tesla gained46% year over year to $10.74 billion. This allowed it to improve its gross margins by 437 basis points to 25.6%, while its free cash flow was up 84% at $1.87 billion. Tesla has existing production capacity to manufacture more than one million cars each year and is currently developing six more factories to meetgrowing demand. In 2021, Tesla forecasts it will sell 750,000 units, representing an increase of 50% year over year.
According to Wedbush analyst, Daniel Ives, Tesla stock is expected to hit$1,000 by March 2022. Ives has upgraded Tesla stock to outperform and increased his price target from $950. In an investor note to clients, the analyst wrote, “We now believe Tesla could exceed 850k deliveries for the year with 900k a stretch goal, despite the chip shortage and various supply chain issues lingering across the auto sector.”
The bull case for Lordstown Motors
Lordstown Motors is an automotive company that was founded in 2019 with the goalof developing and manufacturing light-duty electric trucks. It has developed its flagship vehicle, known as Endurance–a full-size pick-up truck. According to the company,Endurance’s production will begin in September 2021.
Lordstown Motors is still pre-revenue and did not generatesales last year. Analysts tracking the company expect itto report sales of $111.19 million in 2021. This figure is forecast to rise by an astonishing 1,260% to $1.5 billion in 2022, which means it is trading at a forward price to 2022 sales multiple of just 1.18x. Like mostearly-stage companies, Lordstown is also reporting an adjusted loss currently.
Lordstown Motors stock is currently trading 65% below its record high, due primarilyto the sell-off EV experienced byEV stocks earlier this year and a short-seller report that accused the company of inflating its fleet orders. Noted short-seller Hindenburg Research allegedthat one fleet order for 1,000 trucks came from a start-up that just has two employees.
In the eventLordstown manages to beat Wall Street estimates and provide solid guidance in the coming quarters, the stock couldcrush peers’ and broader market returns easily. Alternatively, it couldalso experience a significant decline if it continues to disappoint investors.
The final takeaway
Tesla stock has returned a monumental 15,850% since its IPO. This means an investment of $1,000 just after Tesla’s IPO would have ballooned to $159,500 today. Lordstown is currently trading near its IPO price and is in asimilar toTesla at the start of the lastdecade.
It isunlikely that Tesla will replicate its historical gains, but the company remains poised to outperform the broader markets given its leadership position in the EV space.
Alternatively, Lordstown has the potential to outperform Tesla stock but carries significant risks becauseit isstill at a pre-revenue stage. We think investors with healthy risk appetites can place their bet on Lordstown and benefit from market-thumping returns in the long run if the company manages to execute flawlessly over the long run.
TSLA shares were trading at $761.83 per share on Wednesday afternoon, down $0.49 (-0.06%). Year-to-date, TSLA has gained 7.96%, versus a 10.97% rise in the benchmark S&P 500 index during the same period.
About the Author: Aditya Raghunath
Aditya Raghunath is a financial journalist who writes about business, public equities, and personal finance. His work has been published on several digital platforms in the U.S. and Canada, including The Motley Fool, Finscreener, and Market Realist.
Companies in the electric vehicle (EV) space delivered big gains to investors in 2020. But for 2021, should one bet on an EV market leader Tesla (TSLA), which has concrete plans for growth and anticipates building 50% more vehicles this year than last, or gain exposure to emerging player Lordstown Motors (RIDE), which is still at a pre-revenue stage but is trading at an attractive multiple and for which analyst forecast massive growth in 2022? Let’s discuss.
Companies in the electric vehicle (EV) spacedelivered big gains toinvestors in 2020. And investors and analysts continue to be bullish on this sectorfor good reason. According to a report from EV-volumes.com, the number of EVs sold in 2020 increased by 43% to 3.34 million units, up from 2.26 million units in 2019.
EVs are now expected to account for 10% of global passenger vehicle sales by 2025, a figure that couldgrow to 58% by 2040.
Given the rapidly expanding market, let’s compare one market leader in the EV space—Tesla (TSLA)—with an emerging player—Lordstown Motors (RIDE)—and analyze which stock is a better buy right now.
