Both the Tesla (NASDAQ: TSLA) share price and the Lucid Group (NASDAQ: LCID) share price have been soaring recently. Indeed, Tesla has recently surpassed the $1,000 mark, valuing the company at over $1trn. This is an 184% rise over the past year. Lucid Group has also soared since going public via a SPAC deal in July. Since the company went public, it has nearly doubled in value. So, should I now be buying these EV stocks or am I too late?
Lucid Group has strong prospects
There is certainly a lot of promise surrounding Lucid Motors and I am most impressed about the company’s products. For example, its flagship product, the Lucid Air, claims a huge range of 520 miles, which easily beats all of Tesla’s vehicles. As of the end of June, there were also over 10,000 reservations for the Air. It is hoped that this figure will increase when the company reports to investors on 15 November. This is a factor that could see the Lucid share price soar.
Its future prospects also look strong. Indeed, total revenue is expected to be just over $2bn next year, rising to over $22bn by 2026. The group also predicts that it will be able to reach positive EBITDA by 2024. Of course, these are just estimates and there is certainly no guarantee that it will be able to reach these ambitious figures. It does demonstrate that the growth potential is extremely strong though, and some may say this gives Lucid even more upside potential than the Tesla share price.
But I’m not quite ready to buy Lucid shares. Using the company’s own estimates, it trades on a forward price-to-sales ratio of around 36, which is expensive. With a market capitalisation of nearly $70bn, it also has a similar valuation to BMW, even though BMW recorded revenues of over $100bn in 2020. Lucid Group, on the other hand, has no real trading history. This means that I cannot justify the Lucid share price, and I’m leaving it on the sidelines for now.
And the Tesla share price…
Tesla shares have soared recently, thanks to strong third-quarter earnings and a sale of 100,000 vehicles to Hertz. This has given the EV stock a valuation of $1.2trn, higher than other massive tech companies such as Meta (formerly Facebook) and Alibaba. But is this justified?
There is no doubt that the third-quarter trading update was excellent. In fact, revenues totalled nearly $14bn, a 57% rise year-on-year. Net income was also able to reach over $1.6bn, a 389% rise from last year. This demonstrates the rising profitability of the firm. The recent deal with Hertz, and continually increasing manufacturing capacity, is also likely to propel growth further.
But after the recent rise in the Tesla share price, it trades on a current price-to-sales ratio of around 24. Although slightly lower than Lucid Group, this is still comparatively high against other tech stocks. I’m also worried that competition will increase, especially as traditional automotive companies, like Ford and Daimler, are bringing EV cars to market. Therefore, even though I find Tesla stock a more appealing proposition than Lucid shares, it’s still far too expensive for me to buy right now. It will take a major dip to get me interested.
Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Stuart Blair has no positions in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
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