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Tesla shares and the Nasdaq Composite Index fell on Tuesday.
Brendon Thorne/Getty Images
On Tuesday, sales of growth stocks accelerated, dragging down Tesla and other electric car stocks. The stock rebounded from the bottom, but one of the results of the sell-off is that electric vehicle valuations are now scattered everywhere.
It is difficult to explain what the market is trying to tell investors.
This
Nasdaq Composite Index
It was down 2.5% on Monday and about 3% in early trading on Tuesday.
Tesla
The stock (stock code: TSLA) fell by nearly 11%, but then fell by about 2% at 10:50 AM Eastern Time.Nasdaq and
S&P 500
It is now down by about 1.9% and 0.4% respectively.
Inflation is a new worry for investors. When inflation expectations rise, high-growth stocks are often hit even more. Higher inflation rates mean higher interest rates. In that case, dividends and bond yields become more attractive than the cash flow of high-growth companies, which may take several years. High interest rates also make financing growth more expensive.
Inflation is not the only thing about electric car stocks on Tuesday. Lucid Motors agreed to merge with Churchill Capital Corp IV (CCIV), a dedicated acquisition company. The merger is a victory in the field of electric vehicles. Investors bid too much for the SPAC-Lucid merger because they thought the deal was coming. Based on the Monday price announced before the merger, Lucid is worth approximately $96 billion. Then on Tuesday, Churchill’s stock price plummeted by more than 30%. But even with such a large drop, Tuesday’s price still valued Lucid at more than $60 billion, making it the eighth most valuable automaker in the world. Lucid has not yet sold the vehicle.
Lucid’s current price-to-earnings ratio is about four times the company’s estimated sales of approximately $14 billion in 2025. In this case, the projection is not an estimate, but a number generated internally by Lucid. In contrast, Tesla’s price-to-earnings ratio is about seven times the estimated $120 billion in 2025. This estimate is the average of several analysts on Wall Street.
A more in-depth study of EV valuation will only make things more confusing.
Fisk
(FSR) is expected to have sales of $13 billion by 2025, and its value is only a small part of it. The reason for the valuation gap is difficult to determine.
Lucid listed impressive specifications and battery technologies, including the Lucid Air luxury sedan, which is expected to be launched later this year, with a range of 500 miles per charge. Lucid is also run by former Tesla engineer Peter Rawlinson (Peter Rawlinson). But Fisker’s first model, Ocean, is expected to become an affordable SUV, and Fisker is run by the legendary car designer Henrik Fisker. In addition, Fisker works with experienced car manufacturers to
Magna International
(MGA) to assemble the ocean.
The difference between Fisker and Lucid is not the only strange comparison. These three Chinese electric car manufacturers with significant sales have relatively large valuation ranges:
Wei Lai
(NIO),
XPeng
(XPEV), and
Lee Motors
(LI). According to the figures for 2025, the transaction prices of these three are also much cheaper than Tesla.
EV’s valuation range is approximately 0.5 to 7.5 times the estimated sales in 2025, so it is possible to find the correct EV stock valuation level somewhere. It is difficult to know the exact location. By 2025, there will also be winners and losers of electric vehicles – it’s hard to know who.
Write to al Root allen.root@dowjones.com
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