In this article, I have evaluated Rivian Automotive, Inc. (RIVN) and Japan-based Mazda Motor Corporation (MZDAY) to predict auto stock trends for this year. After thoroughly evaluating these stocks, I think that MZDAY might be a superior choice for the reasons discussed in this article.
Rapid population growth, urbanization, infrastructure development, and industrial expansion are expected to drive commercial vehicle sales growth. Also, the escalating demand for high-end passenger vehicles is also likely to enhance the performance of the market. The global automotive market is projected to grow at a CAGR of 6.9% until 2030.
Moreover, the growth of the automotive manufacturing equipment industry is being driven by a combination of global demand for vehicles, the adoption of automation and robotics technology, increasing demand for electric and hybrid vehicles, and a focus on sustainability and energy efficiency. Therefore, automotive manufacturing equipment market is expected to grow at a CAGR of 11.1% until 2028.
MZDAY is a clear winner in terms of price performance, as RIVN has declined 3% over the past three months as compared to MZDAY’s 10.6% gain. Also, RIVN declined 24.4% over the past six months compared to MZDAY’s 27.2% gain.
Here are the reasons why I think MZDAY might perform better in the near term:
Recent Developments
On December 14, 2023, RIVN and AT&T had announced that they had signed an agreement for AT&T to purchase Rivian electric vehicles (EVs) for AT&T’s fleet through a pilot program aimed at cutting transport emissions. AT&T expects to begin adding the Rivian Commercial Van and R1 vehicles to its fleet in early 2024 to begin evaluating the various ways these vehicles help improve safety, reduce costs and cut its carbon footprint.
Recent Financial Results
RIVN’s revenues for the third quarter ended September 30, 2023, rose 149.4% year-over-year to $1.34 billion. However, the company’s adjusted net loss attributable to common stockholders came in at $1.13 billion. Also, its adjusted net loss per share attributable to common stockholders came in at $1.19 and adjusted EBITDA came in at $942 million.
On the contrary, for the second quarter that ended September 30, 2023, MZDAY’s net sales increased 41.1% year-over-year to ¥2.32 trillion ($15.94 billion). Its operating income rose 134.6% over the prior-year quarter to ¥129.61 billion ($890 million). For the same quarter, the company’s net income attributable to owners of the parent and net income per share stood at ¥108.13 billion ($742.85 million) and ¥171.49, up 25.9% and 25.9%, year-over-year, respectively.
Past And Expected Financial Performance
Over the past year, RIVN’s revenue grew at a CAGR of 260.5%. Analysts expect RIVN’s revenue to grow by 164.8% this year and 91.7% in the fourth quarter ended December 2023. Its EPS is expected to be negative $4.96 this year, negative $1.31 in the fourth quarter ended December 2023 and negative $1.05 in the current quarter ending March 2024.
Conversely, MZDAY’s revenue has increased at a CAGR of 37.8% over the past year. Its revenue is expected to increase 52.1% this year and 5.5% in the third quarter ended December 2024.
Valuation
RIVN’s forward P/S multiple of 4.10 is higher than MZDAY’s 0.21. Additionally, RIVN’s forward EV/Sales multiple of 2.76 is higher than MZDAY’s 0.18.
Thus, MZDAY is more affordable.
Profitability
RIVN's trailing-12-month gross profit margin of negative 64.1% is lower than MZDAY’s 20.69%. In addition, RIVN’s trailing-12-month EBITDA margin of negative 134.51% is lower than MZDAY’s 7.26%.
Thus, MZDAY is more profitable.
POWR Ratings
RIVN has an overall rating of F, which equates to a Strong Sell in our proprietary POWR Ratings system. Conversely, MZDAY has an overall rating of A, translating to a Strong Buy. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. RIVN has an F grade for Stability which is justified by its 24-month beta of 2.36. On the other hand, MZDAY has a B grade for Stability, which is in sync with its 24-month beta of 0.61.
Moreover, RIVN has a F grade in Quality. Its trailing-12-month ROCE and trailing-12-month ROTC of negative 43.52% and 24.08% are lower than the industry averages of 11.40% and 24.08%.
On the other hand, MZDAY has an A grade in Quality. Its trailing-12- ROCE and trailing-12-month ROTC of 6.25% and 4.71% are 3.2% and 17.9% higher than the industry averages of 6.05% and 4%.
Among the 52 stocks in the Auto & Vehicle Manufacturers industry, RIVN is ranked #50, while MZDAY is ranked #3.
Beyond what we’ve stated above, we have also rated both stocks for Growth, Value, Momentum, and Sentiment. Get all RIVN ratings here. Click here to view MZDAY ratings.
The Winner
The auto market is expected to keep growing in the coming years amid favorable market trends. Industry players such as RIVN and MZDAY are well-positioned to benefit from the industry tailwinds.
However, RIVN's poor profitability, elevated valuation and high beta value makes its competitor MZDAY the better buy.
Our research shows that the odds of success increase when one invests in stocks with an Overall Rating of Strong Buy or Buy. View all the top-rated stocks in the Auto & Vehicle Manufacturers industry here.
What To Do Next?
Discover 10 widely held stocks that our proprietary model shows have tremendous downside potential. Please make sure none of these “death trap” stocks are lurking in your portfolio:
MZDAY shares were trading at $5.75 per share on Friday afternoon, down $0.10 (-1.73%). Year-to-date, MZDAY has gained 8.08%, versus a 0.06% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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