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Why Tesla Shares Rose Today, but Nio and Lucid Dropped

What happened

Investors look to be trading three electric vehicle (EV) company stocks Monday based on some comments made by business analysts over the weekend and Monday morning. Tesla (NASDAQ: TSLA) stock jumped by as much as 2.6%, and was still up 0.3% as of noon ET. On the other hand, stocks of Chinese EV maker Nio (NYSE: NIO) and U.S.-based start-up Lucid Group (NASDAQ: LCID) were down 3% and 4.7%, respectively, at that time.

So what

On Monday morning, Mizuho analyst Vijay Rakesh cut his stock price targets on both Tesla and Nio. As Marketwatch reported, Rakesh cited some known recent issues for the EV makers, including the COVID-related shutdowns in China's manufacturing hub of Shanghai, which exacerbated ongoing global supply chain issues. The Chinese government is relaxing those shutdowns, but analysts' vehicle delivery estimates are coming down due to the production delays they created.

Rakesh maintained his buy ratings on both Tesla and Nio, as even the reduced price targets reflect plenty of upside. He moved Tesla's 12-month stock price estimate down to $1,150 from $1,300, and Nio's from $55 to $48 per share. If the companies hit those new targets, that still would amount to a gain of about 55% for Tesla and a more than 100% increase for Nio. But the underlying reasons for the price target cuts could be spooking Nio investors more. Tesla has other areas where it could make up for any Shanghai-related headwinds, while Nio is fully reliant on its China facility.

Now what

Investors' reactions may have been influenced by a Barron's article published over the weekend that highlighted Tesla's strength in the EV market. That article also focused on Lucid and what it described as a valuation discrepancy between the start-up and more established names, including Nio.

Specifically, the article pointed out that with a market cap of about $30 billion, Lucid stock trades at more than 8 times its 2023 estimated revenue of $3.5 billion. That compares to a ratio of about 2.5 for Nio. But it's not just the price-to-sales ratio that Lucid investors should be concerned about. Lucid currently only offers very expensive vehicles. Its Air Dream Edition sells for about $170,000, an even higher price than Tesla's top EV, the Model S Plaid.

Lucid faces the risk that the market for ultra-expensive EVs will become more limited and that its sales volume growth will flatten. Lucid does have plans for future models that will carry lower prices, but investors seem to be focused on the nearer term now. Long-term investors should be sure to look beyond expectations for just the next year or two.

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Howard Smith has positions in Lucid Group, Inc. and Nio Inc. The Motley Fool has positions in and recommends Nio Inc. and Tesla. The Motley Fool has a disclosure policy.


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