Market corrections may be frightening to new investors. These, on the other hand, are excellent times to acquire shares of firms that appear expensive. This year, the Nasdaq Composite Index has fallen by around 21%.
EV stocks have likewise taken a beating. Let’s take a look at two EV firms that appear to be undervalued right now.
Tesla’s investors had been divided for some time about the company’s prospects as an EV maker. The firm, nevertheless, has reduced several of those debates in recent quarters with growing revenue, profits, and margins.
Tesla has carved out a niche in a capital-intensive industry with extensive barriers to entry. Furthermore, it is presently producing industry-leading margins. Elon Musk, Tesla’s CEO, announced plans to cut staff anticipating a recession. This move again might be an attempt to preserve margins if one occurs as predicted. Finally, Tesla has a number of growth opportunities beyond electric vehicles. What it demonstrates is that even if Tesla stock does not return to its historical P/S or P/E ratios, there is still potential for considerable expansion from current levels. Furthermore, sales and earnings growth will support the share’s value, even if the multiple doesn’t improve from current levels.
Overall, Tesla stock appears to be considerably more appealing today than it did at the start of the year. Now might be a good time to invest in Tesla stock if you’ve been waiting to do so.
The price of the (RIVN 0.27%) stock has dropped roughly 69% thus far in 2022. Because investors are deserting more speculative firms, this young EV maker has taken a greater hit than other comparable enterprises owing to a broader market downturn. Soon after debuting in November of last year, Rivian’s hype sent the stock’s value to unsustainable heights.
Rivian has yet to achieve profitable operations. Furthermore, supply chain difficulties and higher material costs have compounded the company’s problems. Scaling up profitably is still a significant challenge for the company. Obviously, investors are worried, which has resulted in a sell-off of the stock.
Rivian, on the other hand, has several significant benefits that the market is overlooking. The firm is a pioneer in the electric pickup truck market and its products have received largely positive reviews. It has also placed an order for Amazon-delivery vans in excess of 200 vehicles. As a new EV manufacturer, Rivian will face challenges; nevertheless, it may overcome them over time.
Overall, Rivian stock has dropped to more appealing levels. The forward P/S ratio for Rivian, according to estimated sales for 2023, is around 4. Although it appears to be high, the firm is still relatively new and has years ahead of it.
Given the stock’s wild swings and lack of profitability, it’s vital to remember that the stock is best suited for those who are prepared to take a lot of risk.