The electric vehicle market is getting crowded as traditional automakers release new EV models and new start-ups expand their position in the market. The result has been a rise in EV sales, which jumped 7% in the U.S. last year.

But finding a long-term winner among EV stocks isn't exactly easy right now. The share prices of many companies have fallen over the past few years as investors have tried to figure out how quickly EVs might replace traditional autos.

That's left some people wondering whether established EV maker Tesla (NASDAQ: TSLA) or start-up Rivian (NASDAQ: RIVN) is a better buy. Here's the case for each.

The case for Tesla

The case for Tesla is pretty straightforward, considering the automaker is a leader in EVs. Tesla has 18% of the battery electric vehicle market, though competition among Chinese automakers and EV start-ups is rising.

Tesla's early lead in electric vehicle manufacturing continues to pay off, allowing it to weather rising material costs, component shortages, and other hiccups that derail smaller EV companies.

There are legitimate criticisms of Tesla, including that some of its model lineup is a little long in the tooth and a promised cheaper EV model has yet to materialise. Tesla CEO Elon Musk has said that a cheaper model could launch later this year, but details are sparse.

However, Tesla also has new growth opportunities in the pipeline. Musk recently debuted the company's Robotaxi, which will be part of an upcoming Tesla ride-hailing service. Some estimates put the global autonomous ride-hailing market at $480 billion by 2032, and big investments from Alphabet's Waymo and Nvidia indicate this space is heating up.

It's worth pointing out that Tesla recently reported disappointing fourth-quarter results. Its total sales rose just 2% to $25.7 billion, while automotive revenue declined 8% to $19.8 billion. Tesla said reduced average selling prices for its Model S, Model X, Model 3, and Model Y resulted in lower revenue in the quarter.

The case for Rivian

Rivian makes impressive EVs that have caught the attention of automakers and customers. The company's brand has topped Consumer Reports' list for owner satisfaction -- among all automakers, not just electric vehicle companies -- and both Volkswagen and Amazon have invested billions into Rivian.

Rivian's vehicle production fell 13.5% in 2024 to 49,476 vehicles, and deliveries rose by 3% to 51,579.But management recently said that some of the component shortages that limited production last year have been fixed.

Rivian expects its first gross profit in the fourth quarter (which will be reported on February 20). Rivian cut material costs for its lineup last year and re-engineered some of its production to lower expenses.

There's no denying that Rivian has a long road ahead. The company had a net loss of $1.1 billion in the third quarter, and production needs to ramp up to narrow the gap. But there are also bright spots for the company.

Rivian will launch its new, smaller R2 SUV in the first half of 2026, and a small R3 crossover vehicle is also on the way. The R2 will start at $45,000, much cheaper than the current starting price for its R1S, which is $75,900. This should expand Rivian's customer base, attracting far more customers with smaller budgets.

The company also recently started a joint venture with Volkswagen, allowing the established automaker to use electric architecture and in-vehicle technology for future vehicles. Rivian will receive up to $5.8 billion in investments, equity, and loans.

The partnership indicates that Rivian is more than just another EV start-up trying to carve out its niche; it's also attracting sizable investments from established automakers that see its potential.

The better EV stock depends on your goals

These two companies are in different chapters of their EV story. Tesla is well-established, profitable, and ahead of many competitors. Rivian, on the other hand, is just getting started. It's difficult to compare them directly.

I think there's a case for owning both, but they each require some compromises. For example, Tesla's share price gain of 100% over the past 12 months (as of this writing) means the stock's forward price-to-earnings ratio is a very pricey 115.

Meanwhile, Rivian is a very speculative EV investment as the company tries to increase production and fend off other EV start-ups. The company's success is anything but guaranteed, yet I think its strong brand, management's focus on cutting costs, and partnerships make for a compelling reason to own its stock (which I do).

In other words, if you're OK with paying a premium for an EV stock, then choose Tesla. But if you'd rather invest in an EV start-up with the potential to carve its own path in the electric vehicle market, Rivian is a great option.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Shares of electric vehicle makers Tesla (NASDAQ: TSLA), Rivian, and Aehr Test Systems rallied on Wednesday, up 8.04%, 4.5%, and 10.98%, respectively.

There wasn't much company-specific news today, so the across-the-board rally likely had to do with today's important inflation report.

CPI runs hot, but the important 'core' CPI cools

Inflation is a critical factor in demand for autos, as a car is a large-ticket item that is often financed by customers. But interest rates have proven to be especially critical for electric vehicle stocks, given that EVs have up until this point been a bit more expensive, at least up front before maintenance, than traditional internal combustion cars.

In addition, EV stocks tend to be unprofitable or trade at high multiples. Interest rates tend to especially punish high-multiple stocks or unprofitable stocks, as higher rates depress the value of cash flows that are further out in the future, while also making financing a business more expensive.

Thus, today's positive inflation report sparked a "risk-on" rally, including these EV-related stocks. Today, the December Consumer Price Index (CPI) was released.

While the overall CPI came in a bit hotter than expected, "core" CPI figures, stripping out volatile food and energy prices, actually cooled more than expected. The CPI came in at 2.9% year over year and 0.4% month over month, versus expectations of 2.8% and 0.3%, respectively. However, core CPI came in at 3.2% year over year and 0.2% month over month, below the 3.3% and 0.3% expected.

Cool inflation data is critical, as new fears of an inflation reacceleration came to the fore after the Federal Reserve's December meeting and press conference. In that meeting, Fed chair Jay Powell and other officials worried that strong economic data and the Fed's 100 basis points of rate cuts since September may prevent inflation from coming down as quickly as hoped. After that meeting, long-term Treasury rates rose, and expectations for more short-term interest rate cuts fell, suggesting higher interest rates for borrowers of autos.

So, today's "core" numbers coming in cooler than expected generated relief from the fears over higher rates.

Each stock may have also bounced harder, given that each had sold off recently. Tesla enjoyed a post-election pop, thanks to Elon Musk's backing of President-elect Trump, but has since seen a pullback. That pullback was amplified when Tesla reported a miss on its fourth-quarter deliveries in early January. Furthermore, the deliveries implied Tesla would experience its first-ever annual sales decline in 2024.

Rivian actually beat its fourth-quarter delivery target and popped on that news early in the month, but has since retreated amid the concerns about interest rates. Moreover, Rivian was down double digits in 2024, and remains unprofitable as it attempts to get to scale, losing $1.44 billion in the third quarter 2024 alone.

Aehr Test Systems isn't a vehicle manufacturer, but it does make chip testing equipment that is largely centered on silicon carbide chips that go into electric vehicles. Aehr actually reported earnings on Monday that disappointed investors, missing both revenue and earnings expectations, and the stock plunged more than 25%.

Aehr had actually been disclosing new orders from both AI accelerator clients and gallium nitride clients in recent months, highlighting its attempts at diversification. However, the downturn in EVs is still affecting the majority of its existing business. CEO Gayn Erickson noted that silicon carbide investment would remain difficult outside of China in 2025.

Have electric vehicle stocks bottomed?

It's difficult to say whether today's CPI report marks the end of the downturn for EV-related stocks, but it's certainly a positive data point. It's also unclear whether EV demand is totally dependent on interest rates. Early adoption of EVs seems to have slowed, but this could also be due to factors like range anxiety. It's also possible the new administration may repeal the EV tax credit, which could also slow a recovery in EVs.

All in, EV stocks still make for risky bets, especially given their high multiples or unprofitable status. Investors may want to stick with the highest-quality and profitable players in the EV supply chain, which ranges from chips, to parts manufacturers, to OEMs like Tesla and Rivian, to chip testing equipment like Aehr.

Furthermore, investors need to keep track of not only interest rates, but technology innovation and government policy changes as well. It's a difficult sector, but can also lead to big gains if EV adoption reaccelerates.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Why electric vehicle stocks like Tesla just rallied appeared first on The Motley Fool Australia.

Shares of both Tesla (NASDAQ: TSLA) and Rivian (NASDAQ: RIVN) have struggled this year. Since 2024 began, Tesla stock has fallen 8% in value. Rivian shares, meanwhile, are down by roughly 25%.

What has gone wrong? Could this be a rare buying opportunity?

2 trends you should know about

There are a few statistics EV investors must be aware of. The first is that the EV market continues to grow, even if growth rates move around quite a bit. Last year, for instance, EV sales in the U.S. jumped 60%, from 1 million in 2022 to 1.6 million in 2023. To put all this into perspective, in 2016, only 200,000 EVs were sold in the U.S. -- eight times fewer than the number sold annually today.

To be sure, gasoline vehicles continue to dominate, commanding around 75% of total U.S. vehicle sales. But so far in 2024, EV sales continue to climb. Why then, you might ask, are the share prices of EV makers like Tesla and Rivian down so much this year? The problem isn't growth -- it's expectations.

According to S&P Global, despite "clear demand for EVs in the U.S., the rate of EV growth was slower than some automakers had anticipated." This has caused many auto manufacturers to delay their EV introduction timelines by 12 to 18 months. "Slowing the development of vehicles and production capacity in 2024 and 2025 can reduce risk of having more inventory than the market wants, while being ready for presumed developing demand the last years of this decade," S&P Global observes.

These two trends are the most important factors in the EV market today. Yes, sales are growing, and will continue to do so likely for another decade or more. But short-term sales growth has lagged expectations, causing EV manufacturers to reduce investment and new model timelines. It is this reset in expectations that has weighed heavily on EV stocks this year.

Is this a buying opportunity for Rivian and Tesla stock?

Despite subdued EV demand growth this year, expect continued new product launches, including an entry-level Cadillac EV and Volvo's EX30 SUV. These product launches -- most of which were given the green light when EV demand growth was soaring -- will continue to add pricing and inventory pressure on existing manufacturers. "The increased model count will have a negative impact on volume per model in most cases, which will affect profit margin for the lower-volume vehicles," advises S&P Global. "It also increases costs, as marketing, sales and service are more expensive when those costs are spread across more models."

What will ultimately drive EV demand growth higher isn't necessarily more models, but more affordable models. "EV demand growth has slowed sharply in 2024, likely due in part to affordability," explains a recent report from Bank of America. The bank doesn't forecast enough affordable EVs hitting the market to drive growth higher until 2027.

How should you be investing in light of this bleak multi-year forecast? The biggest factor is simply to have patience. EV growth is still healthily in the double digits. The U.S. charging network, meanwhile, continues to grow by leaps and bounds. Recent research from The Motley Fool shows that Tesla's supercharger network, for example, now covers huge swaths of all 50 states. And due to technological advancements, prices continue to get closer and closer to mass adoption levels. By 2030, Bank of America expects nearly one-third of all U.S. vehicle sales to be electric.

If you're willing to wait through the pain, now might be a great time to capitalize on some rare EV stock bargains. Over the past 12 months, the price-to-sales ratios for Tesla has fallen by roughly 30%. Rivian's multiple, meanwhile, has been cut in half. Patient investors may be able to secure bargain prices until the adoption curve picks back up in 2026 and 2027.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post 2 EV trends Tesla and Rivian investors should understand now appeared first on The Motley Fool Australia.

With its shares down by almost 90% since it went public in November 2022, Rivian (NASDAQ: RIVN) has been a hugely disappointing investment for those who bought shares early, especially compared to alternatives like Tesla, which is up by around 27% over that one-year timeframe. The upstart electric vehicle (EV) maker has had to raise capital as its cash burn has continued.

But now that those issues have been priced into the previously overvalued stock, could it be time to buy?

What went wrong for Rivian?

Rivian's story over the past year illustrates some of the dangers of investing in initial public offerings (IPOs) -- a dynamic where retail investors can often end up holding the bag for a start-up's powerful early-stage backers. In Rivian's case, these included giants like Amazon and Ford Motor Company, both of which had business partnerships with Rivian prior to its IPO. These deals were votes of confidence in the automaker, and likely contributed to its lofty initial valuation of $85.9 billion -- more than Ford and General Motors combined.

The problem is that Rivian's fundamentals didn't support such a high price tag. In 2022, the company generated just $1.66 billion in revenue and a whopping $6.86 billion in operational losses.

To be fair, it is normal for early-stage companies to post small amounts of revenue and big losses as they pour resources into scaling up their businesses. But Rivian's valuation was far out of touch with reality. Its current market capitalization of around $16 billion makes more sense considering the uncertainty around its future in its competitive industry, as well as macroeconomic challenges like higher interest rates and inflation.

Rivian stock now trades at a price-to-sales multiple of 4.1, which is a sharp discount to its rival Tesla, which trades for 8.5 times sales. Its valuation makes more sense now, and positions the company as a relatively affordable way to bet on the EV opportunity. That said, valuation isn't the only factor a potential investor needs to consider.

What about its operational performance?

Rivian's operational performance has been mixed. In the third quarter, revenue jumped by an impressive 149% year over year to $1.33 billion. And despite the challenging macroeconomic environment, the company has thus far avoided getting caught up in the EV industry's price war. Indeed, it has actually increased its average sales price per vehicle thanks to strong demand for its models, according to CEO RJ Scaringe. This trend suggests customers see standout value in its unique, outdoorsy EV brand.

Management is also optimistic about the future. The company has raised its full-year production guidance to 54,000 vehicles for 2023 (up from 52,000 previously).

That said, Rivian's bottom line still leaves much to be desired. The company generated an operating loss of $1.44 billion in Q3. While this was an improvement from the $1.77 billion it lost in the prior-year period, Rivian is still draining its cash reserves, which stood at just $7.9 billion as of the end of the quarter. Investors should expect this company to eventually issue more debt or sell more shares (with the resulting equity dilution) -- or both -- to fund operations as it runs low on liquidity.

Management has said it expects Rivian's gross margin will turn positive in 2024. But this simply means that the selling prices of its vehicles will at that point be higher than their direct production costs -- gross margin doesn't factor in substantial overhead expenses like office salaries, marketing, or research and development.

Is Rivian a better buy than Tesla?

For investors, Rivian has two things that make it attractive compared to Tesla. Firstly, it is a smaller company with possibly more expansion potential. And secondly, it has a lower valuation. However, investors should be careful about betting on less mature companies because their challenges can quickly spiral out of control, particularly if macroeconomic conditions worsen.

Ultimately, Rivian looks like an appealing long-term buy. But investors may want to wait for a few more quarters of upbeat data before purchasing the stock. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Should you buy Rivian stock instead of Tesla? appeared first on The Motley Fool Australia.

Tesla has made massive gains in market share with its electric vehicles, both in Australia and around the world. According to Drive, the Tesla Model Y was the fourth-highest-selling car in Australia in July 2023, and was the second-highest-selling model for June.

But the Tesla share price has been accelerating even faster than the company's car deliveries. Tesla stock is up 131% in 2023 so far, as well as up a whopping 953.6% over the past five years.

For lucky investors who have held Tesla shares for many years, these gains have been very welcome indeed. But today, Tesla is a US$782.4 billion company. As such, it's arguably unlikely (though not impossible) that investors will enjoy a similar level of prosperity over the next five years.

So perhaps electric vehicle fans should look elsewhere for the 'next Tesla'. A leading candidate for that moniker might be Rivian Automotive Inc (NASDAQ: RIVN).

Are Rivian shares the 'next Tesla'?

Rivian is an early-stage US-listed electric vehicle company. Perhaps its biggest claim to fame is the endorsement of US e-commerce behemoth Amazon.com Inc (NASDAQ: AMZN). Amazon owns a 17% share of Rivian and even has an exclusive contract with the company for electric vans.

As it stands today, Rivian has a market capitalisation of US$23.3 billion. That means that Tesla is currently more than 33 times larger than Rivian by market cap.

That might imply that Rivian is the stock that has the most growth potential. The company has indeed been making impressive strides. Our Fool colleagues in the United Kingdom report that Rivian delivered just 920 vehicles in 2021. But by last year, this had exploded to 20,322, and the company is estimated to sell 50,000 vehicles this year.

However, Tesla is still leaps and bounds ahead of Rivian in this department. 2021 saw Tesla deliver 936,172 vehicles. But this year, it's estimated that Tesla will crack 1.8 million deliveries. 2024 could see this number rise even further if the company's long-awaited Cybertruck model proves a hit.

So Rivian does look like an exciting company to be sure. But, personally, I'm still sticking with investing in Tesla. In Tesla, we have a company that has proven runs on the board when it comes to stellar growth. Plus, Tesla has some of the best brand recognition in the world, whereas I'd bet that most Australians wouldn't have heard of Rivian.

Sure, Rivian stock might indeed rocket over the next few years. But it might also buckle under the competitive pressures of the global car market. That's not a choice I'm prepared to wager on right now.

The post Should I forget Tesla shares and buy this US stock instead? appeared first on The Motley Fool Australia.

Electric vehicle (EV) sales are rising. In 2021, 6.6 million EVs were sold worldwide, nearly double the sales in 2020. EV Volumes, a data base, estimates 2022 global EV sales at 10.6 million, up nearly 60% from 2021. More than 16.5 million electric cars and trucks were on the road in 2021.

Despite such encouraging growth in sales, EV makers' stocks have continued to falter in 2022. Let's see why that was so, and if the stocks look attractive for 2023 after the steep declines.

Top EV stocks fell steeply in 2022

U.S. stock markets have corrected significantly so far this year. The S&P 500 is down 17%, while the Nasdaq Composite has fallen more than 28% as of this writing. Since growth stocks typically trade at high multiples, they tend to fall harder during market corrections. This has certainly been true in 2022.   

TSLA data by YCharts..

While Tesla (NASDAQ: TSLA) stock has fallen 49%, Lucid (NASDAQ: LCID), Rivian (NASDAQ: RIVN), and Nio (NYSE: NIO) have fallen more than 60% year to date. And all four stocks have fallen far more from their all-time high prices; while Tesla stock has dropped more than 55% from its peak, the others are down more than 80% from theirs.

Is the correction justified, or is there a buying opportunity?

In early 2021, the valuations of EV stocks went through the roof thanks to the hype surrounding electric vehicles. As the broader markets corrected, EV stocks fell, too. And supply chain challenges have hurt the production of EV companies while raising their costs. But has the recent decline finally made these stocks attractive?

For sure, the EV story is just getting started. All these companies have a long growth runway as the transition from internal-combustion vehicles to EVs unfolds. While it is broadly accepted that this transition is inevitable, what isn't as clear is which players will thrive in the long run.

Tesla continues to post solid performance

Tesla's stock seems to have fallen to an attractive level. While it is difficult to determine whether it'll fall further in the short term, the stock is intriguing for several reasons. To begin with, its valuation is far more sensible than it has been in the past.

TSLA PS Ratio data by YCharts.

Tesla's price-to-sales ratio has fallen to 8.3 from around 30 in January 2021. Although it still looks high compared to traditional automakers, that's because Tesla is still growing fast. The company's revenue increased 56% year over year in the third quarter. And that isn't a one-off quarter; its growth over the years is impressive.

TSLA Revenue (TTM) data by YCharts. TTM = traling 12 months..

The above chart compares Tesla's revenue growth over the last three years with that of traditional automakers.

At the same time, its margins remain impressive.

TSLA profit margin (quarterly); data by YCharts.

Overall, Tesla appears to be on a solid footing to keep posting sustained growth in the coming years.

Nio's growth looks impressive

Chinese EV maker Nio expects substantial growth in vehicle deliveries in the fourth quarter and in 2023. Although the company is still incurring losses, it is increasing revenue rapidly, as the chart above shows. Its upcoming models and expansion plans in Europe can be key drivers in the coming years.

Lucid and Rivian look promising

Lucid and Rivian are still at very early stages of their growth compared to Tesla, but both look promising. Lucid managed to establish itself as a serious player by delivering the longest range for its first model, the Lucid Air. The company, which started deliveries at the end of October 2021, has delivered roughly 2,500 cars in a year. It targets producing 6,000 to 7,000 cars in 2022.

After launching the Sapphire, Pure, and Grand Touring variations of the Lucid Air, the company now plans to open registrations for its first SUV, the Gravity, in early 2023. Its focus on the less-tapped Saudi market could help it drive significant growth.

After starting deliveries in September 2021, Rivian has already produced more than 15,000 vehicles. And it has a backlog of more than 114,000 units of its R1, including both SUVs and pickup trucks. It has an attractive order backlog, too: 100,000 delivery vans from Amazon. What's more, it has enough cash to fund its operations through 2025.

Both Lucid and Rivian are at early stages of their growth and are incurring losses. As young EV makers, they are more affected by the supply chain issues that the industry is facing than are the established players. Both companies look promising, but investors should note that these stocks are riskier compared to those of legacy automakers or Tesla.

But they have corrected drastically and, if successful, could generate windfall returns for long-term investors. In short, all four stocks look like attractive buys for 2023.  

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Down more than 50% from their highs, are Tesla and these other EV stocks buys for 2023? appeared first on The Motley Fool Australia.

What happened 

A handful of electric vehicle (EV) stocks hit the brakes Monday morning as the optimism that pervaded the market last week began to wane. 

Additionally, several pieces of negative news specific to the EV sector -- including a price target cut for Tesla (NASDAQ: TSLA) and a Barron's column that expressed scepticism about the futures of some EV companies -- contributed to the pessimistic mood shift. 

As of 11:22 a.m. ET, Tesla was trading down by 3.5%, Rivian Automotive (NASDAQ: RIVN) was off by 4.7%, and EV charging company ChargePoint Holdings (NYSE: CHPT) had lost 3.8%. 

So what 

Let's start with the issue that is likely the main concern putting pressure on EV stocks now: persistent inflation. 

Last week, the stock market rallied after the latest inflation report was better than economists had been expecting. In October, the Consumer Price Index increased 0.4% month over month and was up 7.7% year over year, less than the expected sequential increase of 0.6% and 7.9% annually.

That helped the market rally for its best week in nearly five months.

Investors were optimistic that potentially slowing inflation would encourage the Federal Reserve to ease back on its aggressive interest rate hikes. 

But storm clouds returned over the weekend after Federal Reserve Governor Christopher Waller indicated that investors were reading too much into the October inflation report. 

While Waller said the Fed may be at the point where it can consider shrinking the increments of its federal funds rate hikes, he also said that "we're not softening" and added: "Quit paying attention to the pace and start paying attention to where the endpoint is going to be. Until we get inflation down, that endpoint is still a ways out there."

Those comments rained on investors' parade and helped send EV stocks sliding Monday morning.

Adding to some of the EV pessimism was a column published by Barron's over the weekend that asserted that rising inflation and falling share prices could hurt many EV start-ups as they try to raise capital. 

Those concerns could especially be weighing on ChargePoint Holding and Rivian Monday as investors try to gauge how well EV companies will be able to navigate continued supply chain issues and rising costs. 

Finally, investors may also be reacting to Bank of America cutting its share price target for Tesla from $325 to $275. Analyst John Murphy wrote in a research note distributed Monday that supply chain issues will continue to be a problem for the company and the broader electric vehicle industry. 

Now what 

EV stocks have tumbled significantly over the past year -- Tesla fell 44%, Rivian tumbled 74%, and ChargePoint plunged by 51%. 

But Rivian showed in the third quarter that it can continue to increase its vehicle production -- output was up by 67% -- despite the headwinds. And the company still has $13.8 billion cash and cash equivalents on its books, enough to fund its operations through 2025. 

And Tesla's latest results were solid. It increased sales by 56% and earnings by 69% compared to the year-ago quarter, and vehicle production jumped 54% in Q3 to 365,923 vehicles.

ChargePoint investors will get a closer look at the company's financial picture on Dec. 1, when the company reports its results for its fiscal third quarter, which ended Oct. 31. 

But with inflation still high and investors concerned about the potential of a U.S. recession, it's likely that EV stocks could remain volatile in the short term.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Why is Tesla stock falling today? appeared first on The Motley Fool Australia.

What happened

On another bright "green" day for the stock market, shares of electric vehicle manufacturers are doing better than most. As of 11:05 a.m. ET Tuesday, shares of EV leader Tesla (NASDAQ: TSLA) had surged by 5%, well outpacing the S&P 500 (which was up a solid 0.9%). Electric truck rival Rivian (NASDAQ: RIVN) was doing even better with a 6.9% gain and Chinese EV maker Nio (NYSE: NIO) was doing best of all -- up 7.8%.

But news from Tesla was probably the main reason for all of these gains.

So what

As multiple sources reported, Tesla on Monday announced it was cutting the prices for its popular Model 3 sedans and Model Y crossover EVs in China by as much as 9%. As The Wall Street Journal reported, a "standard" Model Y in China now sells for the yuan equivalent of just $39,800 -- versus the $58,190 price being charged for a "long range dual motor AWD Model Y" (the cheapest model shown on Tesla's website) here in the U.S.    

Now why would investors think this is good news? After all, as my Foolish colleague Travis Hoium just pointed out, all else being equal, a 9% reduction in MSRP can easily translate into a 9-percentage-point reduction in operating profit margins. So if Tesla earned 17.2% margins on its cars last quarter (which it did, according to data from S&P Global Market Intelligence), cutting the costs of some Tesla cars by 9% could mean cutting its profits on those cars in half.

If you assume (as seems logical) that rivals Rivian and Nio will have to cut their prices in order to compete with Tesla, that would seem to foreshadow falling profit margins across the board in the EV sector.

Now what

That, as they say, is the bad news. But here's where the news might be a bit better for Tesla, Rivian, and Nio. One reason why Tesla is able to cut prices so drastically, says CEO Elon Musk, is that the costs of the commodities it requires to build its cars "are dropping a lot" and the company now anticipates that it will "see some cost reduction in 2023."  

So it seems that while Tesla is sacrificing some of its profit margin through EV price reductions, it may also be gaining some profits back farther up the supply chain. As long as the cost of manufacturing Teslas (and Nios and Rivians, of course) falls in tandem with the prices these companies charge for their EVs, there's a chance that lower car prices won't mean lower profits for their makers.

Or so investors seem to be hoping Tuesday.

Is that a smart bet? Maybe. It's still possible Tesla's price cuts will spark a price war among EV makers. There's also the potential for the still-rising cost of some commodities -- lithium in particular -- to mess up the math and prevent Tesla and its peers from cutting their total costs enough to make up for their price cuts. When you get right down to it, your safest bet is still to avoid the riskier stocks in this space like Nio and Rivian -- neither of those companies is currently profitable -- and focus instead on Tesla.

Trading at 59 times trailing earnings, Tesla still isn't what I'd call a cheap stock. But at least it's cheaper than the alternatives. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Why Tesla and other EV stocks popped today appeared first on The Motley Fool Australia.

Amazon (NASDAQ: AMZN) is the largest e-commerce company in the world with a market value of over $1.3 trillion. Its website generated 2.7 billion hits last month, making it a no-brainer platform for brands that want to elevate their online presence. 

Peloton (NASDAQ: PTON) is set to join that club, announcing this morning that a range of its products and merchandise items are now available on Amazon's U.S. website. It's the latest in a string of drastic moves by the maker of at-home exercise equipment, to arrest rapidly slowing sales and expanding financial losses.

The partnership is a win for Peloton, but it's likely a bigger win for Amazon. Here's why. 

Peloton is retooling for a world beyond pandemic restrictions

Peloton was one of the best-performing companies during the worst of the pandemic. Gyms were closed, workers were attending their jobs remotely, and society was enduring varying degrees of lockdowns. That left few opportunities for people to get their exercise fix, so a range of interactive at-home equipment that brought the workout – and the classes -- into the home was a proverbial home run. 

But as pandemic restrictions eased thanks to widespread vaccinations, Peloton's business quickly deteriorated. The company will report its financial results for the fiscal 2022 full year this week, and it's expecting that revenue will come in at around $3.5 billion, which would be a sizable drop from the $4 billion it generated in fiscal 2021. 

The drop in sales is underscored by a steep drop in engagement, measured by the average number of monthly workouts in the most recent fiscal third quarter which fell 28% year over year. Put simply, gyms are open, people are free, and they're using their Pelotons far less often. 

The company installed a new CEO at the beginning of 2022 and tasked him with righting the ship. So far, sweeping changes have been made which include staff layoffs and broad cost cutting, a trial of a new subscription-based sales model for its equipment, and moving production to external manufacturers. 

Now, for the first time in its history, Peloton will deviate from its direct-to-consumer sales model and offer the Peloton Bike, Peloton Guide, accessories, and apparel outside of its showrooms and its website, on Amazon.com. 

Why this partnership is a big win for Amazon

Earlier this year, Wall Street was abuzz with the news that Amazon was interested in buying Peloton. The move would have been well within Amazon's wheelhouse because it's no stranger to acquisitions -- and Peloton would've been a relatively small one given the company is worth just $4 billion as of this writing, thanks to a 92% drop in its stock price from its all-time high.

It ultimately never happened, but with this new partnership in place, Amazon gets the benefit of selling Peloton's products on its website and earning revenue without the baggage of absorbing a business that has lost a whopping $1.8 billion over the last four quarters. Additionally, Peloton's financial situation is rather grim with just $879 million in cash on hand which is mostly a result of taking on $750 million in debt in May. 

Peloton's Chief Financial Officer has commented that customers initiate 500,000 Peloton product searches every month on Amazon.com, reinforcing the positive impact this deal could have for his company. But it might be just as beneficial for Amazon, because every time a customer can't find what they're looking for on Amazon.com, it increases the likelihood that they will navigate to another website which costs the company more than just that one potential sale. 

When a customer can find what they're looking for, Amazon not only wins the sale, but its artificial intelligence algorithms gain an opportunity to push other products into their view and potentially generate further revenue. It's estimated that these recommendation engines are responsible for 35% of Amazon's online sales, so being able to satisfy that monthly search volume for Peloton products will be a win for Amazon overall. 

Amazon stock is a buy now

Amazon is fresh off a strong, but mixed, second quarter of 2022. It suffered a net loss mainly as a result of its stake in electric vehicle maker Rivian Automotive (NASDAQ: RIVN), because shares in that company have fallen sharply recently. 

But that speaks to Amazon's operational diversity. It offers investors a cross-section of the digital economy and it continues to drive innovation. Having multiple revenue streams insulates the company from external shocks like high inflation, which is currently putting pressure on consumers and, therefore, Amazon's e-commerce segment. But its cloud segment, driven by Amazon Web Services, still managed to grow by 33% year over year during the quarter. 

Additionally, its relatively new advertising segment has delivered $33.9 billion in revenue over the last four quarters and remains an exciting opportunity going forward thanks to the company's valuable media assets, like the rights to the NFL's Thursday Night Football. 

While the Peloton deal is exciting, Amazon is more than just an e-commerce company now and there's no shortage of reasons to own the stock. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Amazon.com (NASDAQ: AMZN) just had a great quarter, and its stock is rising as a result. Although shares are still down 16% year to date, Wall Street expects the e-commerce giant to keep growing because its business model seems to show resilience even during recessionary times. 

Yet, as good as business was for Amazon, there are warning signs too that should give investors pause. Maybe now isn't the best time to buy its stock.

E-commerce slows as cloud services soar

Amazon's growth rate is slowing. While revenue of $121 billion was up 7.2% year over year, that was actually down sequentially and represents its slowest growth in 20 years. It also lost $2 billion in the period, with both domestic and international retail showing operating losses.

The core retail business continues to face a number of headwinds right now, including rampant inflation, energy costs that remain historically high, elevated transportation costs, and rising labor costs. 

While much of Amazon's net loss can be blamed on the continued downward spiral of electric truck maker Rivian Automotive Inc. (NASDAQ: RIVN) in which Amazon has a big investment and caused a $3.9 billion pre-tax valuation loss, those macroeconomic inputs are also impacting Amazon's margins. 

But what's keeping the e-commerce company's financial position looking better than it otherwise would is the cloud services business, Amazon Web Services (AWS), which showed solid, double-digit growth of 33% in the quarter. AWS revenue hit $19.7 billion, generating operating income of $5.7 billion, also up 36%.

Trimming the fat and then some

And that may be masking a deeper issue. Amazon shed almost 100,000 workers in the quarter, or about 6% of its workforce, and they are the largest cuts it has made in a single quarter. 

CFO Brian Olsavsky said they added employees in the first quarter due to the omicron variant of the coronavirus, but they essentially became redundant afterward. It was able to get rid of most of those let go through normal attrition, and Amazon still has over 188,000 more workers than it did last year. He also said Amazon would likely increase staffing levels for the holidays again.

Still, after years of operating as a job-creation machine, the growth trajectory has suddenly come to an end. The reduction also likely helped Amazon save on labor costs in the quarter, something it struggled with during the so-called Great Resignation when people left their jobs and never returned to the market.

In last year's fourth quarter, for example, Amazon took a $4 billion charge mostly because of labor costs, and though Olsavsky said last quarter the company needed to improve efficiency while it increased staffing, it instead reduced employment levels.

The reduction comes as many other tech companies are also slashing their payrolls, including Microsoft (NASDAQ:MSFT) and Shopify (NYSE: SHOP), while Alphabet (NASDAQ:GOOGL) and Meta Platforms Inc. (NASDAQ:META) have eased back on hiring. 

Clouds on the horizon

Amazon's payroll cuts likely helped improve its financial picture for the period, but it hints that the recessionary winds blowing may not be so transient. If we enter a protracted period of economic contraction, Amazon may see e-commerce growth slow as consumers find it difficult to keep spending.

Amazon.com is no longer necessarily the place to find the best price on goods, though admittedly that may not have been the prime attraction for its service in a while. Breadth of product and delivery speed has been a bigger value.

In a recession, though, that might not be the case, and despite its cloud services' increasingly essential to the overall businesses as time progresses, online retail may hamper performance. The underlying message of the job cuts just might mean this is not the time to buy Amazon stock.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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What happened

Shares of Rivian (NASDAQ: RIVN) are making big gains in today's trading. The electric vehicle (EV) company's stock was up roughly 7.5% as of 3 p.m. EDT Wednesday. Meanwhile, the S&P 500 index climbed roughly 1%, and the Nasdaq Composite index was up roughly 1.9%. 

Growth-dependent stocks have seen volatile trading recently, and the market has seen big swings this week. While there doesn't appear to be any fresh, business-specific news driving the company's share price higher, Rivian is benefiting from an uptick in bullish sentiment lifting the broader market. 

So what

After a day of dramatic sell-offs on Monday, yesterday's trading delivered some rebound momentum, and the recovery has been even stronger Wednesday. Rivian published an update last week announcing that it had produced 2,553 electric vehicles in its recently completed first quarter and that it was on track to meet its goal of delivering 25,000 vehicles this year. The combination of positive momentum for the market today and recent indications that the business is making encouraging progress are prompting big gains for the stock. 

Now what

Rivian's business has just recently started ramping up significantly, with the $54 million in sales that it posted in last year's fourth quarter pushing full-year revenue to $55 million. Investors won't have to wait long to get a more detailed look at Rivain's business operations and outlook. The company recently announced that it will be publishing its first-quarter earnings results and hosting a conference call after the market closes on May 11.  

The company now has a market capitalization of roughly $37 billion and is valued at approximately 19 times this year's expected sales. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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What happened

Investors don't expect electric vehicle (EV) start-ups to be profitable for several years after commercial production begins.

One key to profitability is manufacturing at volumes that will cover fixed costs. So when EV maker Rivian Automotive (NASDAQ: RIVN) told investors in its March report for fourth-quarter 2021 results that it was reducing production guidance, investors fled. Over the full month of March, Rivian stock dropped 25.6%, according to data provided by S&P Global Market Intelligence.

That plunge has continued so far in April, with Rivian shares now down more than 40% since the beginning of March. 

So what

Though the company said it has capacity to produce as many as 50,000 of its electric vehicles this year, it said in its shareholder letter on March 10 that it only expects to make 25,000 due mainly to supply chain issues. 

More recently, in a Securities and Exchange Commission (SEC) filing dated March 31, 2022, the company added additional risks, including the conflict in Ukraine as well as fuel and energy prices, as potentially impacting its progress. The company specifically noted it has experienced impacts in "facility construction to equipment installation to vehicle component supply".

Now what

Investors already were aware that Rivian was trying to navigate how inflation was affecting its raw material costs. On March 1, the company said it was raising prices on both its pickup trucks and SUVs, including for those that had already been ordered. After facing immediate backlash from customers who had made those reservations at a lower price, the company reversed its decision.

Rivian CEO RJ Scaringe acknowledged the mistake, stating in a letter to shareholders, "We didn't give you enough insight into what was driving these decisions...In speaking with many of you over the last two days, I fully realize and acknowledge how upset many of you felt."

The takeaway for investors is that the company will have to shoulder those rising costs internally for the more than 80,000 vehicles that were ordered prior to March 1. Rising costs combined with Rivian's lower pace of production pushed many investors to sell the stock in March. 

In the first week of April, Rivian announced it produced 2,553 vehicles in the first quarter. It added that it believes it remains "well positioned" to achieve the lowered guidance of 25,000 vehicles it provided just a month prior.

That didn't give investors any additional incentive to buy the stock, however. But with the share price down more than 60% so far in 2022, it may be close to a level that long-term investors find makes for a good time to buy. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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The share price of electric vehicle (EV) maker Rivian Automotive (NASDAQ: RIVN) rose by more than 17% Tuesday. Even in the world of EV stocks, which tend to rise and fall rather dramatically, that's a significant price spike. 

There was no specific news driving Rivian's share price higher, though. Rather, it appears that investors may be trying to take advantage of the fact that the stock has fallen by more than 47% over the past three months.

Are investors right to be snatching up shares of the electric truck maker now? I think so, but I also think they should temper their expectations. 

There's no denying that Rivian has created a fantastic product. Its R1T model is the first-ever all-electric pickup truck, and it won MotorTrend's Truck of the Year award for 2022. 

That doesn't mean it will be a slam dunk when it comes to sales, but it does indicate that Rivan could have a first-mover advantage in the EV pickup truck space. 

At a base price of about $79,000, the R1T isn't cheap, and some other electric trucks will be hitting the market soon, most notably the Ford F-150 Lightning. But as Tesla's success has demonstrated, there's a market for EVs that are designed, built, and sold by companies devoted entirely to that specific niche. 

Will traditional automakers succeed in the EV industry? Of course. But it seems a bit premature to count out disruptive players like Rivian that already have great products. 

One of the biggest arguments against Rivian right now is the fact that it's facing supply chain problems and rising costs. 

While those are significant hurdles, and the company forecasts that it'll only produce 25,000 vehicles this year, it also has enough cash to keep the company growing.

Rivian ended 2021 with $18.4 billion in cash, which should give the EV maker the financial cushion it needs to stay afloat as it expands production. 

That being said, there are no guarantees for Rivian or its investors. The automotive industry is experiencing a significant shift right now, and many traditional automakers will successfully move from gas-powered to battery-powered vehicles. 

Some of the current crop of hopeful EV makers will carve out their own niches over the next few years, and some may fade away. 

But with its current cash stockpile and its award-winning truck, Rivian has the potential to be a success over the long term, which is why I think opening a small position in this EV stock could be a smart move. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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What happened?

Investors have punished the stock of Rivian Automotive (NASDAQ: RIVN) this year, sending its shares down by more than 60%. The negative sentiment was still in evidence Thursday ahead of its fourth-quarter and full-year report, which is due out after the closing bell. Shares of the electric vehicle start-up were down almost 10% in early trading, and remained lower by 9% as of 1:12 p.m. ET.

So what?

In this next report to investors, the company will be forced to confront early missteps such as a lack of communication regarding the departure of its chief operating officer, its failure to hit internal production estimates for 2021, and a recent price increase it was forced to walk back. But investors will be more interested in what Rivian says about its prospects for ramping up its production volume, updated reservation data, and its plans for expansion. They will be particularly interested to hear about the status of its contract to sell up to 100,000 commercial delivery vans to Amazon.com Inc (NASDAQ: AMZN). 

Now what?

Supply chain problems are being reported by most automakers -- large legacy names as well as start-up EV makers. Rivian has already made it clear that its materials costs are increasing. And after having to backtrack on its announced price increase for existing reservation holders, the company will now have to bear those added costs itself. Investors will want to hear more details about those higher expenses and how they will affect margins. 

While its 60% year-to-date share price decline may seem to create a tempting entry point, investors should keep in mind that the company still carries a lofty market cap of $36 billion. 

Any downward adjustments to its 2022 production estimates or suggestions that its path to profitability will take longer than previously forecast will likely knock the stock down even further. Those details are what investors should focus on in Rivian's report when it arrives. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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What happened

One day after electric truck company Rivian Automotive (NASDAQ: RIVN) voluntarily blew up its stock price by announcing it would raise the price of its R1T pickup truck by 17%, and its R1S SUV by 20%, Rivian stock is tumbling once again on Thursday.

As of 10:25 a.m. ET, Rivian is down another 5% -- a total of an 18% drop since this debacle began.

So what

Rivian tried to mitigate the PR damage this morning. After announcing yesterday that "inflationary pressure, increasing component costs, and unprecedented supply chain shortages and delays for parts (including semiconductor chips)" necessitated the price hikes just yesterday, today Rivian CEO RJ Scaringe promised that Rivian would eat some of those costs itself.

In a letter to customers, he wrote, "Earlier this week, we announced pricing increases that broke the trust we have worked to build with you. ... [W]e wrongly decided to make these changes apply to all future deliveries, including pre-existing configured preorders."

In an attempt to rectify this mistake, Scaringe said, "For anyone with a Rivian preorder as of the March 1 pricing announcement, your original configured price will be honored. If you canceled your preorder on or after March 1 and would like to reinstate it, we will restore your original configuration, pricing, and delivery timing."

Now what

This should go a ways toward repairing customer trust in the company, but ... once burned, twice shy. Rivian is still going to suffer a reputational hit from this debacle.

It will also take a financial hit. In explaining the company's original move to raise prices, Scaringe reiterated that "everything from semiconductors to sheet metal to seats has become more expensive," pointing out that other automakers have raised their average prices "more than 30%" to cover their own added costs of production. Rivian will now have to eat those higher costs on the more than 70,000 preorders it racked up in past months.

If you figure that the average price increase that the company attempted to pass along was about $13,000 per vehicle, you have to assume that Rivian is now looking at something like $910 million in unanticipated costs -- and losses -- from keeping its word on all those preorders.

Final point: Rivian will want to make up those losses down the road. Expect even higher prices on new preorders and sales going forward and a consequent decrease in customer willingness to pay those high prices -- depressing future sales.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Barely days ago, the stock of Rivian Automotive (NASDAQ: RIVN) caught the market's attention when billionaire George Soros' investment fund revealed a stake in the electric vehicle (EV) start-up. Turns out, Soros isn't the only billionaire that eyed Rivian.

In its latest 13F filing with the Securities and Exchange Commission, activist investor and billionaire Dan Loeb's hedge fund, Third Point, revealed  ownership of 4,046,572 shares of Rivian for the quarter ended Dec. 31, 2021. As of that date, Third Point's Rivian stake was valued at roughly $408.3 million. 

Notably, Third Point didn't own any shares in Rivian until the third quarter, which means something about the EV pickup truck manufacturer must have caught Loeb's attention in the following months. Rivian stock surged Thursday morning on the news, encouraging some to bet on Rivian stock ahead of the company's quarterly earnings release on March 10. Should you jump in, too? 

But while institutional buying in stocks is seen as a stamp of approval, you must also remember that such financial institutions do not disclose their stock moves in real time, and a lot may change by the time you find out what they bought and sold.

So for example, the latest filings from Loeb's and Soros' funds reveal their portfolios as of the end of 2021, and there's no knowing yet whether they still own, have bought more, or sold off Rivian shares since. 

In fact, if Loeb and Soros saw an opportunity in the sharp dip in Rivian's stock price in the end of 2021, they must be disappointed given how far the EV stock has fallen further since -- it's down a whopping 37% year to date, as of this writing. 

The point being, if you want your money's worth, you might want to pay less attention to billionaire moves on a stock and stay laser-focused on the company's underlying fundamentals and growth opportunities. 

Rivian was an early mover in the red-hot EV industry, and its R1T pickup truck even won the 2022 MotorTrend Truck of the Year award. However, Rivian failed to meet its production target last year even as its net loss mounted to $2.2 billion against revenue of only $1 million during the nine months ended Sept. 30, 2021. 

Yet the demand for the R1T pickup has been strong so far, and Rivian is reportedly ramping up production rapidly now to nearly 200 units per week, according to Bloomberg. Meanwhile, Rivian is working on its R1S SUV as well as its commercial vans, for which it has already secured an order for 100,000 units from e-commerce giant Amazon (NASDAQ: AMZN).   

Rivian, though, must show the numbers to gain investors' faith, which is why its upcoming earnings report is so important. Has it really scaled up production and deliveries? Has it delivered its first electric delivery vehicle (EDV) to Amazon as planned? Is it on track to start key projects like the construction of its second factory in Georgia this year? 

These are just some of the important questions investors in Rivian should seek answers to on March 10, as only answers in the affirmative can help the stock rebound and sustain momentum given that it's still commanding a steep market capitalization of $58 billion despite the recent plunge. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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