teslaone of the largest companies in the world with a market capitalization of over $1 trillion, remains a viable investment opportunity. But investors who correctly identify the next Tesla could see bigger gains by investing in electric vehicle (EV) stocks.
Quite a few metrics suggest Lucid Group(NASDAQ:LCID) It’s possibly the diamond in the rough you’re looking for, even if you have as little as $200 to invest right now. Because? Because the entire business is still valued below $10 billion, although it doesn’t take much imagination to see the electric vehicle company one day being worth at least $100 billion.
But before you begin, make sure you understand two things about the company.
Despite a big increase in sales since 2021, most of Lucid’s growth path is still ahead. This is mainly because electric vehicle sales in the United States are still only a small part of total auto sales.
According to data collected by the United States Energy Information Agency, currently only 7% of car sales in the United States are electric models. That’s down from a peak of 8% in 2024, but still considerably higher than the 1% in 2018.
Where do electric vehicle sales go from now on? Analyst expectations are all over the place, but almost all predictions are trending in the same direction: up.
S&P GlobalFor example, he believes that despite some difficulties in 2024, the next few years should prove seismic for both production and demand for electric vehicles. “The automotive industry’s transition to electric vehicles is accelerating,” says a recent report from the organization.
That report predicts that 2026 will be a tipping point for electric vehicle demand, leading to 25% of cars sold in the US being electric by 2030. So if S&P Global is right, the Sales of electric vehicles should triple in the next five years.
In many ways, Lucid is in the right place at the right time. The failures of a long list of EV makers were largely attempts to compete in a world where demand was minimal: less than 1% of total auto sales.
Today, electric vehicles have a foothold in the market and most people know someone who owns one, if they don’t own one themselves. And as most forecasts predict, this foothold will only strengthen over time. We’re no longer waiting for the electric vehicle market to take shape: it’s here, and there’s still plenty of growth ahead.
Lucid has done a commendable job in meeting the demand. Its sales grew about 70% year over year last quarter after growing about 90% the previous quarter.
By 2024, analysts expect companywide sales to be $778 million. For this year, however, they predict a 118% increase in sales, reaching $1.69 billion.
Driving this growth is its Air sedan and its new Gravity SUV, which just went into production a few months ago. These two models are priced between $70,000 and $100,000, depending on options.
So while the company can’t yet tap into the mass market, it has proven capable of producing high-end luxury models with enough buyer appeal to generate more than $1 billion in sales in a single year.
RIVN (TTM) earnings, data from YCharts; TTM = last 12 months.
Lucid is on a promising trajectory. It now has two luxury EV models in production and its sales base is expected to grow significantly in 2025 alongside growing demand from the broader EV industry, a trend that will not let up for potentially several decades. But there’s one number I’ll be paying close attention to on February 25, the next time Lucid reports its quarterly earnings: gross margins.
RIVN gross profit margin data by YCharts.
Due to Lucid’s rapid sales growth, the market has assigned it a premium valuation of 10 times sales. Tesla, for example, trades at about 14 times sales, while fellow electric vehicle maker rivian trades at just 3.3 times sales.
There are many differences between these three companies, but perhaps the biggest is their different ability to generate profits on each car they sell. Tesla has generated positive gross margins for more than a decade. Rivian has struggled to achieve positive gross margins despite $5 billion in sales last year.
As a smaller competitor, Lucid gets the benefit of the doubt for now. But if you jump into this growth stock, keep a close eye on its profitability. In the coming quarters, its gross margins are expected to get closer to where Rivian is today.
Have you ever felt like you missed the boat when buying the hottest stocks? Then you’ll want to hear this.
On rare occasions, our expert team of analysts issues a “Double bet” actions recommendation for companies that believe they are about to explode. If you’re worried you’ve missed an opportunity to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:
NVIDIA:If you invested $1,000 when we doubled down in 2009,you would have $352,417!*
Apple: If you invested $1,000 when we doubled down in 2008, you would have $44,855!*
netflix: If you invested $1,000 when we doubled down in 2004, you would have $451,759!*
Right now, we are issuing “double bet” alerts for three incredible companies and there may not be another opportunity like this anytime soon.
See 3 “double bet” actions »
*Stock Advisor returns from January 6, 2025
Ryan Vanzo has no position in any of the stocks mentioned. The Motley Fool has positions and recommends Tesla. The Motley Fool has a disclosure policy.
1 Obvious EV Stock to Buy with $200 Right Now was originally published by The Motley Fool
