NIO vs. Lordstown Motors: Which Electric Vehicle Stock Is a Better Buy?

Both electric vehicle manufacturers Nio (NIO) and Lordstown Motors (RIDE) have seen their shares skyrocket in 2020. But which is the long-term better buy.

It’s been a great year for those that are invested in electric vehicle (EV) stocks. Shares of the KraneShares Electric Vehicles & Future Mobility Index ETF (KARS) are up more than 60% year-to-date.

Specifically, shares of Tesla (TSLA), NIO (NIO), and Lordstown Motors (RIDE) have returned 640%, 1,000%, and 105% respectively in 2020. This means a $500 investment in each of these stocks at the start of the year, would have returned a cumulative $10,000 today. 

Today we’re going to take a look at which EV stock, Nio or Lordstown Motors, is a better investment in the long-term.

Nio (NIO) stock is trading 19% below record high

Shares of NIO are trading at roughly $45 which is almost 20% below its record high. It seems NIO stock is cooling off a bit after a stellar run this year.

In the third quarter, NIO’s sales stood at $666.6 million while its loss per share was $0.12. Comparatively, analysts forecast the company to post sales of $655 million and a loss of $0.17 per share in the third quarter.

While NIO easily beat Wall Street estimates in Q3, it seems investors were concerned over the company’s sky-high valuation. NIO stock has a forward price to sales multiple of 26x and is still posting an adjusted loss.

However, investors should note that NIO has access to the world’s largest EV market and has multiple secular tailwinds that will drive revenue growth higher in 2021 and beyond.

In November NIO delivered 5,291 vehicles compared to the 2,528 vehicles in the prior-year period. During the company’s Q3 earnings call, CEO William Bin Li forecast the company aims to increase the monthly production of vehicles to 7,500 in 2021.

It already increased production capacity from 4,000 units per month to 5,000 units per month at the end of Q3. In the first 11 months of 2020, NIO's deliveries are up 111.1% at 36,721 units.

Recently, Goldman Sachs analyst Fei Fang upgraded NIO stock from “Sell” to Neutral” and increased the stock’s 12-month target price to $59. Fang is bullish on NIO as he expects regulatory incentives and the company’s battery-as-a-service program to positively impact long-term revenue growth.

Lordstown Motors (RIDE) is valued at a market cap of $3.4 billion

RIDE is another EV manufacturer that is currently developing its flagship vehicle called Endurance which is an electric full-size pick-up truck. This means the company is not generating any sales currently and analysts expect the company’s sales to touch $114.5 million in 2021.

RIDE confirmed it is on track to begin the production of Endurance in September 2021. The company claimed it has received 50,000 non-binding production reservations for the vehicle with an average order size of 500 vehicles per fleet.

While production is expected to begin in late September, RIDE will ramp up manufacturing capacity in 2022. The company is one of the first movers in this niche space and said its vehicle will have a mileage that is 5x times better than ICE pick-up trucks. It further disclosed Endurance will lower maintenance costs by 65%.

The verdict

There is no doubt that Nio and Lordstown Motors are both parts of a rapidly expanding market. Over 60% of all vehicles are estimated to be EVs by 2040, up from the 2% figure in 2020.

However, NIO is trading at a lower forward price to sales multiple compared with RIDE. NIO is a proven player in the EV market while RIDE has to combat several hurdles to win investor confidence. Any revenue or earnings miss when it begins production will send Lordstown stock spiraling downwards.

Nio remains a safer bet given the significant uncertainties surrounding Lordstown Motors.

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NIO shares were trading at $45.60 per share on Monday morning, up $2.56 (+5.95%). Year-to-date, NIO has gained 1,034.33%, versus a 16.46% rise in the benchmark S&P 500 index during the same period.

About the Author: Aditya Raghunath

Aditya Raghunath is a financial journalist who writes about business, public equities, and personal finance. His work has been published on several digital platforms in the U.S. and Canada, including The Motley Fool, Finscreener, and Market Realist.


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