Friday is looking like it's going to be a busy day for investors in electric vehicles, with Rivian Automotive(NASDAQ: RIVN) and Lucid Group(NASDAQ: LCID) both having reported earnings last night, and Tesla(NASDAQ: TSLA) stock reacting to the news from its rivals.
Earlier today, Lucid stock was up 6%, though around noon ET it was negative on the day. Similarly, Rivian was up 4.8% earlier but had dipped down to a 0.80% gain. Surprisingly, Tesla stock -- the only one of the three that did not report earnings last night -- was up 6.7% as its market cap crossed the $1 trillion mark for the first time since 2022.
Rivian Q3 earnings
Perhaps Rivian's intraday pullback shouldn't be such a surprise, given how badly the company performed in the quarter.
In Q3, Rivian reported only $874 million in quarterly sales, which was less than Wall Street expected, and a 35% decline year over year -- not a great look for a supposed growth stock. Worse, Rivian's "earnings" for the quarter looked a whole lot more like losses. Analysts had forecast a $0.92-per-share loss for the electric truck maker, but Rivian managed to underperform even that pessimistic prognosis, losing $1.44.
Now, the good news is that Rivian CEO R.J. Scaringe says his company is still on track for positive gross profit for the fourth quarter of 2024, and hopes to boost revenue per unit sold in Q4, while reducing the cost of those units. The bad news is that one way Rivian wants to increase revenue per unit is by charging more for those units (i.e., electric trucks and SUVs). And raising prices in a market where EVs are already struggling to win sales may not be the best strategy for driving growth.
At the same time, Rivian says it will be depending on the sale of regulatory credits to provide the rest of its increased revenue per unit. That might work in Q4, in the waning days of the Biden administration. It's perhaps less likely to work in the future, under a Trump administration that has promised to "rescind all unspent funds" from the Inflation Reduction Act, perhaps including funds earmarked to pay for tax credits on EV sales.
Long story short, Rivian's revenue is shrinking and its plans for growing revenue in Q4 and after Q4 look iffy. When you consider furthermore that cash burn over the first three quarters of 2024 reached $4.5 billion, implying full-year negative free cash flow of $6 billion, things are not looking great for this Tesla competitor right now.
Lucid Q3 earnings
Turning now to Lucid, the news is a bit better.
Q3 sales totaled $200 million at the luxury electric cars manufacturer, up 45% year over year. Lucid also reported that it delivered 1,805 EVs in Q3, which was significantly fewer automobiles than the 2,781 EVs Lucid delivered in the quarter. This suggests relatively stronger demand for Lucid's EVs, and the fact that the company is producing fewer cars than it sells means Lucid shouldn't be facing any problems with inventory buildup that would force it to cut prices and sacrifice profit margins in order to move metal.
That being said, Lucid's 45% improvement in revenue doesn't compare well to the 91% increase in cars delivered, which implies that some price cutting may already have taken place, that consumers are favoring cheaper Lucid models -- or both. It's also worth pointing out that despite growing both revenue and unit sales, Lucid failed to earn a profit in Q3. To the contrary, the company's $0.41-per-share loss was up 46% year over year.
Not to put too fine a point on it, but it's still the case with Lucid: The more cars Lucid sells, the more money Lucid loses.
Finally, a word on Tesla
So what does all of the above imply for Tesla stock? Well, at last report, Tesla's sales year to date were up a bare 0.5% relative to this time last year. That's not as fast as Lucid's sales growth -- but it's a whole lot better than Rivian's sales decline.
Tesla's profits are also down year to date -- almost exactly one-third lower than a year ago at $4.8 billion earned in the year's first three quarters (or $1.38 per share). On the other hand, these profits are at least positive, which is more than either Rivian or Lucid can say. And in contrast to its rivals, Tesla is free-cash-flow positive, generating $1.5 billion in cash profit so far this year. That may not be as good as the $2.3 billion Tesla generated in the first three quarters of 2023, but it's still a lot better than its rivals, illustrating the benefits Tesla continues to reap from having been the first mover in building electric cars for the mass market.
At a P/E ratio around 75 and a price-to-free-cash-flow ratio of 265, I'm not going to be advising anyone to buy Tesla stock anytime soon. But if you absolutely, positively feel you need to invest in an electric car maker, I can think of a whole lot worse alternatives -- and their names are Rivian and Lucid.
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.
