Many electric vehicle (EV) stocks soared to all-time highs in 2021. That rally was largely driven by low interest rates, the growth of commission-free trading platforms, social media buzz, and a fear of missing out (FOMO). Those catalysts caused many investors to turn a blind eye to those companies' steep losses and bubbly valuations.
Most of those stocks crashed as soaring interest rates drove investors away from speculative investments, again. But now that interest rates are set to decline, it might be smart to make a few small bets across the burnt-out EV market.
If you have at least $1,000 to spare, these three unloved EV stocks might generate some multibagger gains for daring investors over the next few years: Nio(NYSE: NIO), Rivian Automotive(NASDAQ: RIVN), and Archer Aviation(NYSE: ACHR).
Image source: Getty Images.
1. Nio
Nio is a leading manufacturer of EVs in China. It manufactures a wide range of electric sedans and SUVs but differentiates itself from competitors with removable batteries that can be quickly replaced at its own battery-swapping stations. That process is a lot faster than charging a vehicle's battery with traditional chargers.
Nio's deliveries more than doubled in both 2020 and 2021 but only grew 34% in 2022 and 31% in 2023. That slowdown was caused by supply-chain constraints, weather-related disruptions, macro headwinds, and intense competition. Its vehicle margins also plummeted amid the intense price war across China's EV market.
That's why Nio's stock dropped from its all-time high of $62.84 in February 2021 to around its initial public offering (IPO) price of $6.26, as of this writing. But at that price, Nio trades at less than 1x next year's sales.
Nio's deliveries also accelerated again in the first half of 2024 as its market share rose and its vehicle margins stabilized. China's recent stimulus measures could drive more consumers to purchase its vehicles again, and it's gradually expanding into the European market.
From 2023 to 2026, analysts expect Nio's revenue to grow at a compound annual growth rate (CAGR) of 28% as it gradually narrows its net losses. That growth should be driven by its newer high-end vehicles for its domestic market and the launches of its cheaper Onvo and Firefly smart-vehicle brands in China and Europe, respectively. If Nio hits those targets and commands a higher valuation, its stock could skyrocket over the next few years.
2. Rivian
Rivian sells electric pickups, SUVs, and delivery vans. It more than doubled its production to 57,232 vehicles in 2023 but only expects to produce 47,000-49,000 vehicles in 2024. It blames that slowdown on supply-chain constraints, macro headwinds for the EV market, and a temporary shutdown of its main plant for upgrades.
Rivian clearly faces some tough near-term challenges but is gradually resolving them by ramping up the production of its own Enduro drive unit, which greatly reduces its manufacturing costs and dependence on third-party components. It also expects to launch its cheaper R2 SUV in 2026 -- followed by its higher-end R3 and R3X SUVs between late 2026 and early 2027 -- as it gradually fulfills Amazon's massive order for 100,000 electric delivery vans through 2030.
If Rivian successfully ramps up its production, analysts expect its revenue to grow at a compound annual growth rate (CAGR) of 28% from 2023 to 2026 as it narrows its net losses. That's an impressive growth trajectory for a stock that trades at less than 2x next year's sales. That's probably why Amazon is still holding its stake in Rivian -- even after it sank nearly 90% from its IPO price of $78 in November 2021 to about $10 today.
3. Archer Aviation
Archer Aviation doesn't produce electric cars. Instead, it's carving out its own niche with its electric vertical takeoff and landing (eVTOL) aircraft for air taxi services. Its flagship Midnight aircraft can fly at a maximum speed of 150 miles per hour, have a range of up to 100 miles, and can carry a single pilot and four passengers. Compared to helicopters, they're cheaper, cleaner, quieter, and easier to land in dense urban areas.
Archer's stock plummeted from its all-time high of $17.14 in February 2021 to about $3 as it disappointed investors with its slower-than-expected growth and steep losses. It only delivered its first Midnight aircraft to the U.S. Air Force earlier in 2024, and analysts expect it to generate less than $2 million in revenue this year as it stays unprofitable.
But Archer still has plenty of irons in the fire. United Airlines placed a long-term $1 billion order for 200 of its Midnight aircraft in early 2021, and the automaker Stellantis invested in the company and chose it as the exclusive contract manufacturer for its own eVTOL aircraft last year.
Analysts expect those game-changing deals to boost its annual revenue to $190 million by 2026. With its current enterprise value of $725 million, Archer still looks reasonably valued at less than 4x that estimate. Its stock could crash if it fails to ramp up its production but could also soar as its nascent eVTOL aircraft business expands.
Should you invest $1,000 in Nio right now?
Before you buy stock in Nio, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Nio wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $826,069!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. TheStock Advisorservice has more than quadrupled the return of S&P 500 since 2002*.
*Stock Advisor returns as of October 14, 2024
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Leo Sun has positions in Amazon. The Motley Fool has positions in and recommends Amazon. The Motley Fool recommends Stellantis. The Motley Fool has a disclosure policy.
