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Electric vehicle (EV) manufacturer Nikola (NKLA) has burned massive investor wealth since it was first listed on the public equity markets a few years ago. NKLA touched record closing highs of $79.73 in June 2020 - the same month of its IPO - and is currently trading as low as $1.38.
That includes a 29% drop in the shares just this week alone, after Nikola said Monday that it was launching a $325 million bond offering - and issued a recall of over 200 battery-powered electric trucks due to safety issues, too.
In a statement, Nikola warned of “significant expenses” tied to the recall and offered no clarity on when vehicle production would resume, noting, "As a result, our brand, business, results of operations, financial condition and cash flows may be adversely affected."
Nikola has already been wrestling with multiple company-wide issues in the last three years. It has consistently failed to deliver on its lofty targets, and its founder and ex-CEO, Trevor Milton, was convicted of securities fraud in 2022. The automaker just named its fourth CEO in the last four years, which is not an ideal development for any company.
Unsurprisingly, then, not one of the six analysts tracking Nikola stock calls it a “buy,” with the whole roster maintaining a "hold" recommendation. The consensus price target of $2.70, meanwhile, implies expectations for NKLA to roughly double from current levels - which suggests price target cuts are possible amid the ongoing sell-off.
Rather than rolling the dice on NKLA, investors looking to gain exposure to the growth potential for EV stocks might instead want to consider some of the industry competitors analysts like better - stocks such as Li Auto (LI), Nio (NIO), and Rivian (RIVN).
Analysts See Major Upside for Li Auto and Nio
China is the world's largest EV market, which means mainland-based EV companies like Li Auto and Nio are top investments right now. In Q2 of 2023, Li Auto reported sales of $3.9 billion and adjusted earnings of $0.38 per share, easily surpassing estimates.
Sales were up 227% year over year, while vehicle deliveries more than tripled to 86,533 units. Li also reported a free cash flow of $1.3 billion, and is on track to increase sales by 144% to $16 billion in 2023. Priced at 2.5 times forward sales, Li Auto stock is relatively cheap.
Plus, analysts love Li. All four analysts tracking the stock call it a “buy,” and the shares trade at a discount of 27% to consensus price target estimates - suggesting the shares have room to run higher.
As for Nio, the stock is down 83% from all-time highs. While still unprofitable, Nio delivered more than 20,000 vehicles for the first time in July, and is forecast to increase sales by 33% to $9.2 billion in 2023.
Nio stock has room to run nearly 25% higher before hitting analysts' consensus price target of $13.56. Out of the 10 analysts covering Nio, four recommend a "strong buy," one recommends a "moderate buy," and five recommend a "hold."
Amazon-Backed Rivian Ramps Up Production
Investors with a somewhat higher risk appetite should also take note of analysts' liking for Rivian, a company backed by tech giant Amazon (AMZN).
Rivian has increased vehicle production at a fast clip, up to almost 14,000 units in Q2 of 2023 from 1,000 units in Q4 of 2021. The company expects to ship 52,000 vehicles in 2023, up from its previous forecast of 50,000 vehicles.
Armed with $10 billion in cash and $11.3 billion in total liquidity, Rivian has enough room to narrow its losses and turn a profit in the next few years.
Out of the 20 analysts covering RIVN stock, nine recommend a "strong buy," three recommend a "moderate buy," and eight recommend a “hold." The average price target for the stock is $28.50, implying expected upside of nearly 40% from current levels.
