Chronicle Journal: Finance

XPeng vs. Lordstown Motors: Which Electric Vehicle Stock Is a Better Investment?

XPeng (XPEV) is a China-based EV-company that is part of the largest electric vehicle market in the world. Comparatively, Lordstown Motors (RIDE) is part of a niche market and is pre-revenue. Which EV stock is a better investment today?

When you look to invest in equities it is essential to take a long-term view as the stock market is very volatile in the near-term. This means you need to look at trends and drivers that will remain relevant for at least a decade or two. 

Which is why investors should consider looking at the electric vehicles (EVs) industry.  The EV market is growing by 36% annually, and should reach 245 million vehicles in 2030 – more than 30 times above today’s level.

In 2020, EV stocks have exploded higher.  The KraneShares Electric Vehicles & Future Mobility Index ETF (KARS) is up more than 60% year-to-date.  Today we’re going to take a look at two EV stocks, XPeng (XPEV) and Lordstown Motors (RIDE), to evaluate which is currently a better investment.

XPeng stock has gained 233% since its IPO

China-based EV company XPeng (XPEV) IPO’d in August of 2020 at a price of $15 per share. It's currently trading at about $48, gaining 220% since going public, indicating a market cap of about $35 billion.

Last month, XPeng reported its first quarter as a publicly listed stock and disclosed vehicle deliveries were up 266% year-over-year and 166% on a sequential basis at 8,578. Sales rose 342% year-over-year to $293.1 million in the September quarter.

In Q4, XPeng expects to deliver 10,000 vehicles and has already delivered 7,264 vehicles in the last two months. The company has projected revenue growth at 244% in Q4. One of the key revenue drivers for XPeng will be its P7 sedan. The delivery number of P7 vehicles rose from 325 in Q2 to 6,210 in Q3.

We can see XPeng is expected to fire on all cylinders and to support its growth, the company will raise $2 billion via another stock offering. Earlier this month, XPeng said it will issue 40 million shares worth $1.94 billion and will use the proceeds for research & development, sales & marketing expenses, working capital requirement as well as strategic investments.

XPeng stock is trading at a forward price to sales multiple of 47.8x and is still reporting an adjusted loss. Analysts tracking the company expect sales to rise by 154% to $2.13 billion in 2021 while its net loss is forecast to improve from $0.85 in 2020 to $0.4 in 2021.

Lordstown Motors

Another EV-based automotive company is Lordstown Motors (RIDE) that designs, develops, and manufactures light-duty electric trucks. Lordstown was founded in 2019 and it primarily develops Endurance which is its flagship vehicle.

Endurance is a full-size pick-up truck and Lordstown expects production of the vehicle to begin in September 2021. While the company will not generate any sales in 2020, analysts expect revenue to be $111 million in 2021.

Lordstown Motors stock has doubled since its IPO earlier this year and is valued at a market cap of $3.13 billion. The company claimed it has received 50,000 non-binding production reservations for Endurance with an average order size of 500 vehicles per fleet.

Lordstown said production capacity will ramp up in 2022 and its first-mover advantage in the electric truck space makes it a top stock for investors with a high-risk appetite.

Verdict

We can see that both EVs discussed here have robust growth prospects. While XPeng is a more established player, Lordstown Motors is pre-revenue and carries more risks. Both stocks trade at a premium and are part of a market that is certain to expand at a stellar pace in 2021 and beyond.

Given that XPeng has established its niche in China, which is the world’s largest EV market right now, I believe it is the better investment today.

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XPEV shares were trading at $47.92 per share on Tuesday afternoon, up $0.75 (+1.59%). Year-to-date, XPEV has gained 125.82%, versus a 16.10% 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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