Tesla (NASDAQ:TSLA) shares have shed 7% of their value over the past one month but are still up 36.4% year-to-date. The decline in the leading electric vehicle (EV) maker’s first-quarter earnings confirmed investors’ concerns about its aggressive price cuts impacting margins. Investors are also worried about the growing competition in the EV space from emerging players like BYD (BYDDY), Nio (NIO), Rivian (RIVN) as well as from legacy automakers like Ford (F) and General Motors (GM).
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Tesla bulls laud its scale and cost advantage, cutting-edge technology, and the financial muscle to support its expansion plans. However, some analysts remain wary about CEO Elon Musk’s claims about the company’s full-self driving (FSD) feature, the stock’s steep valuation despite intense rivalry in the EV market, and Musk’s distraction due to his other ventures. Meanwhile, Tesla recently hiked the prices of some of its models, addressing some concerns about aggressive price cuts.
Wall Street has a Moderate Buy consensus rating on Tesla based on 15 Buys, 11 Holds, and four Sells. The average price target of $202.84 implies 21% upside.
Let’s now take a look at three emerging EV players and their growth potential.
Nio (NYSE:NIO)
Nio has been under pressure over recent quarters due to the disruption caused by the COVID-19 resurgence in China, rivalry in China’s EV market, and the price war triggered by Tesla. Nio’s deliveries in the first quarter increased on a year-over basis but declined sequentially.
Additionally, deliveries grew over 31% year-over-year to 6,658 units in April but fell about 36% from March. Deliveries were impacted by the upgrade of Nio’s vehicles from its Nio Technology 1.0 platform to Nio Technology 2.0. Looking ahead, deliveries are expected to benefit from the launch of the new ES6 SUV and the ramp-up of EC7 SUV production on Nio’s new technology platform. Moreover, Nio’s battery-swapping network gives it an edge over its rivals.
Wall Street’s Moderate Buy consensus rating on Nio is based on six Buys and three Holds. The average price target of $14.92 implies nearly 87.7% upside.
Rivian (NASDAQ:RIVN)
Rivian has often been criticized for its production problems and massive cash burn. The American EV maker pleased investors this week by reporting lower-than-anticipated Q1 losses and reaffirming its full-year production guidance of 50,000 vehicles, which is double of last year. Revenue surged to $661 million from $95 million in the prior-year quarter.
However, Rivian cautioned investors about supply chain issues being “the main limiting factor” for its Normal facility output. It intends to address these issues by launching new engineering design changes and key technologies.
With 11 Buys, six Holds, and one Sell, Wall Street has a Moderate Buy consensus rating on Rivian. The average price target of $23.67 suggests 83.4% upside.
Mullen Automotive (NASDAQ:MULN)
Shares of EV start-up Mullen have plunged over 82% so far in 2023 due to the high uncertainty surrounding the pre-revenue company. Earlier this month, Mullen executed a reverse 1-for-25 stock split to bring the company into compliance with Nasdaq’s (NDX) $1.00 minimum bid price requirement for maintaining listing.
Ahead of the announcement of the reverse split, Mullen also provided a business update, stating that as of April 30, the cash available for operations was $116.1 million. The company also gave details about its manufacturing activities and certain contracts, including purchase orders worth $263 million for Mullen Class 1 and Class 3 EV vans and trucks from Randy Marion Automotive Group. It expects the production line for its Class 3 commercial vehicles to become operational in July, with Class 3 truck deliveries expected to generate revenue in August and September 2023.
While the company has been announcing several orders to revive investor interest, the penny stock remains an extremely speculative bet. On Friday, Mullen announced a vehicle purchase agreement with MGT Lease Company for 250 EV trucks, with the contract valued at about $15.8 million.
Conclusion
Wall Street is cautiously optimistic about Tesla, Nio, and Rivian due to macro challenges and certain company-specific risks. Mullen has a long way to go to compete with these EV players.
As per TipRanks’ Smart Score System, Tesla has a better smart score than the other three EV players. In particular, Tesla’s smart score of eight out of 10 implies the stock could outperform the broader market over the long run. Tesla is comparatively a well-established player with solid margins and the stock has outperformed these EV rivals year-to-date.
That said, Wall Street sees higher upside in Nio, with the pullback in the stock offering a good entry point. Nevertheless, investors should be aware of the high volatility and risks associated with EV stocks.
