Rivian vs. Lucid: Which EV Stock Will Dominate the Next Decade?
Key Points
Rivian and Lucid both trade down massively from their lifetime highs.
Rivian is a high-risk stock with an uncertain outlook, but Lucid looks even riskier.
Lucid recently announced a major recall and production halt, and continued stock dilution remains a big risk for investors.
- 10 stocks we like better than Rivian Automotive ›
Rivian (NASDAQ: RIVN) and Lucid (NASDAQ: LCID) are two companies that are trying to carve out lasting footholds in the electric vehicle (EV) market and scale to the point where they're capable of generating big profits. Unfortunately, both stocks have seen massive valuation declines since hitting peaks shortly after their respective 2021 public-market debuts.
Rivian stock is down roughly 91.5% from its valuation high as of this writing. Meanwhile, Lucid stock trades off approximately 98.5% from its peak price. Which of these EV players stands a better chance of making big gains in the industry and delivering strong performance for shareholders over the next decade?
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Rivian stock is high-risk, but it looks like the better buy
Rivian is still posting big net losses. Gross margins for the company's automotive sales are still negative, even though contributions from the software-and-services business have recently allowed for a shift into recording positive gross margins overall. Some big questions remain about the company's ability to scale to the point where producing reliable profits becomes feasible, but it currently looks like a better investment than Lucid.
Lucid recently announced the recall of more than 4,400 of its Gravity SUVs last quarter and initiated a 29-day shipment halt for the vehicles. While the recall and production disruption for the Gravity don't signal that Lucid's demise is imminent, the SUV line is central to the company's growth strategy for production and deliveries.
The likelihood that Lucid will continue to receive large funding injections from its largest shareholder, Saudi Arabia's Public Investment Fund (PIF), suggests that the company should be able to continue operating despite posting big losses. On the other hand, soft performance for the business and the threat of continued stock dilution as new stock is issued to raise funds paints a challenging picture. Rivian is far from being a guaranteed winner in the EV market, but it's a better investment than Lucid right now.
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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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