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Shares of Tesla fell on Tuesday, along with the Nasdaq Composite.
Brendon Thorne / Getty Images
Rising stock sales accelerated on Tuesday, pulling down Tesla and other electric vehicle stocks. Shares have returned from the bottom, but one consequence of the sale is that EV valuations are now scattered everywhere.
It is difficult to decipher what the market is trying to tell investors.
Nasdaq Composite
fell about 3% in early trading on Tuesday, after falling 2.5% on Monday.
adze
stock (marker: TSLA) decreased by almost 11%, but then recovered to decrease by about 2% starting at 10:50 ET. Nasdaq and
S&P 500
they have now decreased by about 1.9% and 0.4%, respectively.
Inflation is a new concern for investors, and high-growth stocks tend to be hit harder when inflation expectations rise. Higher inflation means higher interest rates. Dividends and bond yields are becoming a little more attractive in this scenario, instead of cash flows from high-growth companies that could be a few years away. High interest rates also make financing financing more expensive.
Inflation is not the only thing happening with EV stocks on Tuesday. Lucid Motors has agreed to merge with Churchill Capital Corp IV (CCIV). The merger is a triumph for the EV sector – one way. Investors have auctioned shares of SPAC that merge with Lucid a little too big, because they bet that the transaction will come. That made Lucid worth about $ 96 billion based on Monday’s price, before the merger was announced. Then, on Tuesday, Churchill shares fell by more than 30%. But even with such a large drop, Tuesday’s prices still appreciate Lucid at over $ 60 billion, making him the eighth most valuable carmaker on the planet. Lucid hasn’t sold a vehicle yet.
Lucid now trades about 4 times the company’s projected sales for 2025 of about $ 14 billion. The projections, in this case, are not estimates – they are the numbers generated by Lucid internally. In comparison, Tesla trades about 7 times the estimated sales in 2025 of about $ 120 billion. This estimate is an average of several Wall Street analysts.
Digging a little deeper into EV assessments makes things more confusing.
Fisker
(FSR), which predicts sales of $ 13 billion by 2025, is valued at a fraction of that amount. The reason for the evaluation gap is difficult to determine.
Lucid lists impressive specifications and battery technology, including an estimated range of 500 miles per charge for its luxury Lucid Air sedan, which will be launched later this year. Lucid is also led by former Tesla engineer Peter Rawlinson. But the Ocean, Fisker’s first model, promises to be an affordable SUV, and Fisker is driven by legendary car designer Henrik Fisker. In addition, Fisker is partnering with an experienced car manufacturer,
Magna International
(MGA), to assemble the Ocean.
The difference between Fisker and Lucid is not the only strange comparison. There is a relatively wide range of ratings for the three Chinese electric vehicle manufacturers with significant sales:
NIO
(NIO),
XPeng
(XPEV) and
Read Auto
(LI). The three are also trading at a big discount to Tesla based on 2025 numbers.
With an estimated valuation range of about 0.5 to 7.5 times for 2025 sales, the correct valuation level for EV stocks is probably somewhere out there. It’s hard to know where exactly. And EVs will be winners and losers until 2025 – it’s hard to know who.
Write to Al Root at [email protected]