Tesla Just Gained the Combined Value of Lucid and Rivian in One Day. Time to Sell?

Electrical vehicle stocks are roaring increased to kick off 2022.

Daniel Foelber

Key Capabilities

  • Tesla blew previous analyst expectations for Q4 2021 manufacturing and vehicle deliveries.
  • The EV kingpin won $144 billion in market cap on Monday by myself.
  • Lucid and Rivian would possibly be better buys as of late given Tesla’s valuation.

Monday kicked off the unique Trading year with a bang as the S&P 500 burst thru to a new all-time excessive. But the most placing memoir became as soon as Tesla‘s (NASDAQ:TSLA) blowout fourth-quarter 2021 and tubby-year manufacturing and starting up results. The company beat expectations, and its share rate rose over 14% on the day. 

As the fifth-largest company within the U.S. with a market cap of $1.2 trillion, is it time to promote Tesla after the wide day? Or does the corporate’s inventory deserve to be increased?

Rivian EVs

Report supply: Rivian Car.

A inventory scurry-up of fable proportions

Tesla won $144 billion in market cap on Monday, which is roughly the combined rate of Lucid Community (NASDAQ:LCID) and Rivian Car (NASDAQ:RIVN). Lucid and Rivian get their justifiable share of criticism for being extremely pricey stocks since both corporations delight in negligible revenue, unclear manufacturing roadmaps, and could in all likelihood be unprofitable for several years. But were Tesla’s better-than-anticipated manufacturing and starting up numbers indubitably so impressive that they warrant the corporate to private that great rate in a single day? Certain and no.

Tesla delivered over 308,000 cars in Q4, which became as soon as 45,000 more cars than anticipated. That’s more than the 20,000 cars Lucid expects to bring in all of 2022. Rivian hasn’t outlined true manufacturing figures for 2022. No matter getting a recent manufacturing skill of 150,000 autos per year, Rivian delivered excellent 386 vans and SUVs within the third quarter of 2021.

Investing in a growth memoir over quarterly performance

Lucid and Rivian must not be valued on their shut to-term manufacturing targets. Moderately, these businesses are valued per what they could additionally change into over time. To their credit, both corporations delight in proved they’ve impressive technology and delight in carved out their delight in niches within the EV market. Lucid is taking a stab at the excessive-stop luxury sedan market with industry-main fluctuate and horsepower. Rivian is focusing on the outdoorsy and adventurer market with extremely effective vans and SUVs constructed for rugged terrain. To claim that Tesla’s quarterly starting up beat is rate the connected to these two electrical automobile corporations is a stretch.

The Tesla remembers are overblown

One other memoir revealed alongside the Tesla manufacturing and starting up numbers is the compelled recall touching on 475,000 Tesla autos. Recalling a Tesla vehicle for an ongoing battery or self-riding insist would be serious. On the opposite hand, that is now not what these recent remembers are for.

Per the U.S. National Toll road Traffic Security Administration experiences, the recall is completely for bad Mannequin 3 backup cameras and Mannequin S trunk latches. What’s more, Tesla estimates that excellent 1% of the 356,309 Mannequin 3s concerned could even delight in these defects. For the Mannequin S, or now not it’s a the same memoir, as 14% of the 119,009 autos concerned are estimated to be bad. Add it up, and that’s the reason excellent 20,224 cars which could possibly be estimated to be impacted from this recall, now not simply about half of a million.

To repair the difficulty, Tesla Service will glance the peril and customers would be eligible for compensation thru Tesla’s Overall Steal Repayment belief. Remembers sound provoking, but this one became as soon as overblown.

The establish to journey from here

When merchants bewitch shares of an organization, they’re finally asserting they mediate the inventory’s recent market cap is an efficient rate. Patrons who were sharp to pay 14% more for Tesla inventory on Monday were in actuality validating the corporate became as soon as rate $144 billion more from the guidelines. On this vein, a 50/50 split of Lucid and Rivian inventory may possibly be the next bewitch.

In its Q3 earnings sage, Rivian talked about it raised $13.7 billion from its initial public offering. Lucid reported $4.8 billion in money all the arrangement in which thru its third quarter but has since landed $1.75 billion from convertible senior notes due in 2026. In sum, both corporations delight in good dry powder to fund a speedily manufacturing ramp.

While or now not it’s unlikely either will change into the next Tesla, a determined advantage Lucid and Rivian delight in over Tesla’s early days is investor reinforce and money. When Tesla wasn’t winning or money glide sure (a situation Lucid and Rivian are inclined to be in over the medium term), it had few decisions rather then to dilute its inventory at the same time as its share rate fell. Nowadays, investor sentiment and the auto industry, assuredly, are very optimistic relating to the manner forward for EVs, suggesting Lucid and Rivian are excellent the tip of the EV inventory iceberg.

No matter its excessive valuation, or now not it’s more than doubtless now not a correct thought to promote Tesla’s inventory now in hopes of locking within the excellent returns. Tesla hasn’t even begun manufacturing at its Germany or Texas ‘gigafactories.’ Quiz is stronger than ever, as the tailwinds of the EV industry private momentum. Tesla is dwelling up to delight in one other wide year in 2022 and support the momentum going. As the industry chief, Tesla can even indubitably be integrated in a basket of EV stocks for merchants taking that manner. And that’s the reason more than doubtless a desirable blueprint. With so many alternatives to steal from as of late, other EV stocks provide more upside than procuring excellent Tesla inventory at recent levels.

This article represents the realizing of the writer, who can even disagree with the “reliable” advice situation of a Motley Fool premium advisory provider. We’re motley! Questioning an investing thesis — even indubitably one of our delight in — helps us all mediate severely about investing and make choices that support us change into smarter, happier, and richer.

Daniel Foelber has no position in any of the stocks mentioned. The Motley Fool owns and recommends Tesla. The Motley Fool has a disclosure policy.”>

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