Many electric vehicle (EV) stocks skyrocketed amid the buying frenzy in meme and growth stocks in 2021. However, many of those stocks subsequently crumbled as rising interest rates highlighted their staggering losses and popped their bubbly valuations. The broader slowdown of the EV market exacerbated that pressure.
But after that steep sell-off, some of those former highfliers look like contrarian plays. I believe Rivian Automotive(NASDAQ: RIVN), Li Auto(NASDAQ: LI), and Polestar Automotive(NASDAQ: PSNY) all have a shot at bouncing back this year. Let's take a closer look at these three EV stocks.
Image source: Rivian.
1. Rivian
Rivian's stock price has plunged nearly 90% from its initial public offering (IPO) in November 2021. The maker of electric pickups, SUVs, and delivery vans for Amazon originally told investors it could produce 50,000 vehicles in 2022, but produced only 24,337 that year as it struggled with tight supply chain constraints.
Rivian overcame most of those issues and produced 57,232 vehicles in 2023, but it warned that it would only produce about 57,000 vehicles in 2024 as it grappled with tougher macro headwinds, intense competition, and a temporary shutdown of its main plant in Illinois to streamline its manufacturing.
That situation seems bleak, but analysts expect Rivian's revenue to have a compound annual growth rate (CAGR) of 39% from 2023 and 2026 as it rolls out its R2 SUVs and continues to fulfill Amazon's order for 100,000 vans through 2030. That's an impressive growth rate for a stock that trades at just 2 times this year's sales.
Rivian is still unprofitable, but its gross margins should improve as it installs its in-house Enduro drive unit into more vehicles and scales up its production capacity. If it can overcome these growing pains, its stock could soar much higher this year.
2. Li Auto
Li is a Chinese automaker that initially produced only plug-in hybrid electric vehicles (PHEVs), but it rolled out its first battery-powered EV, the Li Mega minivan, earlier this year.
Deliveries rose 177% in 2021, 47% in 2022, and 182% to 376,030 vehicles in 2023. Its vehicle margins also expanded in 2023 as its focus on the niche PHEV market insulated it from the ongoing price war across China's battery-powered EV market. Its stock has risen nearly 60% from its IPO price in July 2020.
Unlike many other struggling EV makers, Li turned profitable under generally accepted accounting principles (GAAP) in 2023 as economies of scale kicked in. From 2023 to 2026, analysts expect its revenue to have a CAGR of 28% as its GAAP earnings per American depositary receipt have a CAGR of 16%.
Those are rosy estimates for a stock that trades at just 18 times forward earnings and less than a multiple of 1 to this year's sales. Like many other Chinese stocks, its valuations are being compressed by the tensions between the U.S. and China. But if those tensions ease, we could see more investors rotate back toward Li and other high-growth Chinese EV stocks again.
3. Polestar
Polestar was once Volvo's brand for high-performance vehicles, but it was spun off as a stand-alone EV maker in 2022. It sells three vehicles -- the Polestar 2 fastback, the Polestar 3 SUV, and the Polestar 4 SUV coupe -- and it plans to launch a performance car and a roadster over the next few years.
However, Polestar's stock has declined more than 90% since it went public by merging with a special purpose acquisition company (SPAC) in June 2022.
Like Rivian, Polestar lost its luster as it grappled with supply chain constraints and missed its original growth targets. Its total vehicles produced rose 80% in 2022, but grew just 6% to 54,600 vehicles in 2023 -- which was less than half of its pre-merger target of 124,000 deliveries for the year.
It also postponed the launch of the Polestar 3 from 2023 to early 2024 to resolve some software issues, and it still hasn't filed its long-overdue annual report for 2023.
All of those challenges, along with its persistent losses, made it an easy target for the bears. But analysts expect its revenue to show a CAGR of 87% from 2023 to 2025 as it ramps up its production.
That's a high growth rate for a stock that trades at a multiple of just 1 to this year's sales -- and it could soar once it resolves its most pressing issues.
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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 has a disclosure policy.
