These 2 Electric Vehicle Stocks Are Way Too Cheap. But Should You Buy Them Today?

In This Article:

It seems past time we can finally admit Tesla (NASDAQ: TSLA) has officially made it. Not only did the young automaker prove it could design and manufacture quality vehicles, it made driving an electric vehicle exciting and, dare I say, almost fashionable. But if you missed the boat on Tesla's meteoric rise, fear not, here are two EV stocks that have upside considering their price-to-sales (P/S) valuations. Let's dig in.

Why the P/S ratio?

At its essence, the P/S ratio shows how much investors are willing to pay for each dollar of a company's sales. It's particularly useful for comparing companies that are losing money or still in an early growth phase.

When comparing some EV stocks, two stand out: Nio (NYSE: NIO) and Rivian (NASDAQ: RIVN).

TSLA PS Ratio (Annual) Chart
TSLA PS Ratio (Annual) data by YCharts

This graph tells us a couple things. First, it tells us that Tesla has demonstrated its vision and business prowess enough for investors to push its ratio up to 14 times sales. That's to be expected as Tesla is further in its story and has generated profits already, making it easier for investors to push up its valuation -- especially true if you're a believer in the company's potential robotaxi or artificial intelligence developments.

Second, the graph also tells us that Nio and Rivian have immediate upside if they were to convince investors to come on board and push their valuation up to the competition. Heck, even VinFast Auto has expanded into a decent valuation and it's almost entirely unproven outside of its home Vietnamese market.

Catalysts incoming?

For Nio, the stock could be on the verge of blossoming into a better valuation as the company just launched two brands recently. First it launched Onvo, which only went into production in September, and then in late December it launched Firefly. Both of these brands are positioned underneath Nio's namesake premium brand, and should help boost sales significantly in 2025.

In fact, Nio management expects the company's deliveries to more than double in 2025 to around 440,000 units. Now, for a company that has yet to turn a profit, this sizable gain in deliveries will send its top line soaring, and if management can calm down fears surrounding the ongoing price war in China, it's valuation should narrow the gap with competitors and push the stock price higher for investors.

Rivian's ability to rope in investors and convince them of the future, in hopes it'll improve the company's stock price and valuation, will face a tougher road. That's because 2025 brings the company and its investors zero new vehicle launches -- those won't come until 2026.