1 no-brainer electric vehicle stock to buy for $200 now

Teslaone of the largest companies in the world with a market capitalization of more than $1 trillion, continues to represent a viable investment opportunity. But investors who correctly identify the next Tesla car can make the biggest gains by investing in electric car stocks.

Quite a few metrics indicate Lucid Collection (NASDAQ:LCID) It’s probably the diamond in the rough you’re looking for, even if you only have $200 to invest right now. Why? Because the value of the entire business is still less than $10 billion, although it doesn’t take much imagination to see the electric car company one day being worth at least $100 billion.

But before you jump in, make sure you understand two things about the company.

Despite the significant increase in sales since 2021, most of Lucid’s growth journey still lies ahead of it. This is mostly because Eve Sales in the United States remain just a small fraction of total car sales.

According to data collected by the US Energy Information Agency, only 7% of US car sales are currently electric models. This is down from the peak of 8% in 2024, but still up significantly from 1% in 2018.

Where do electric car sales go from here? Analyst forecasts are everywhere, but almost all forecasts are headed in the same direction: upward.

Standard & Poor’s GlobalFor example, he believes that despite some difficulties in 2024, the next few years should be seismic for electric vehicle production and demand. A recent report issued by the organization stated that “the automotive industry’s transition to electric vehicles is accelerating.”

This report predicts that 2026 will be a turning point for demand for electric vehicles, leading to 25% of cars sold in the United States being electric by 2030. So, if S&P Global’s forecasts are correct, electric vehicle sales should increase to more than triple over the next five years.

In many ways, Lucid is in the right place at the right time. The failures of a long list of electric car makers have largely been attempts to compete in a world where demand has been minimal — less than 1% of total car sales.

Today, electric vehicles have a strong foothold in the market, and most people know someone who owns one, if they don’t own one themselves. As most forecasts predict, this foothold will strengthen over time. We are no longer waiting for the electric vehicle market to take shape, it already exists, and it still has a lot of growth to do.

Lucid has done a commendable job of keeping up with demand. Its sales grew nearly 70% year over year in the latest quarter after growing about 90% in the previous quarter.

For 2024, analysts expect companywide sales to reach $778 million. However, they expect sales to increase 118% for the year, to $1.69 billion.

The story continues

This growth has been fueled by the Aero sedan and the new Gravity SUV, which just started production a few months ago. The prices of these two models range between $70,000 and $100,000, depending on the options.

So, while the company can’t reach the mass market yet, it has proven its ability to produce high-end luxury models with enough buyer appeal to result in sales of more than $1 billion in one year.

Lucid is on a promising path. It now has two luxury electric vehicle models in production, and its sales base is expected to grow significantly in 2025 alongside increased industry demand for electric vehicles in general, a trend that will not stop for potentially several decades. But there’s one number I’ll be paying close attention on February 25, the next time Lucid reports quarterly earnings: Gross margins.

Due to Lucid’s rapid sales growth, the market has given it a premium valuation of 10 times sales. Tesla, for example, trades at nearly 14 times its sales, while fellow electric car maker Rivian It trades at just 3.3 times sales.

There are many differences between these three companies, but perhaps the biggest is their varying ability to make profits from each car they sell. Tesla has been generating positive gross margins for more than a decade. Rivian struggled to achieve positive gross margins despite $5 billion in sales last year.

As a smaller competitor, Lucid is getting the benefit of the doubt at the moment. But if you jump into this growth stock, keep a close eye on its profitability. Over the next few quarters, we expect to see its gross margins trend closer to where Rivian is today.

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Ryan Fanzo He has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool has Disclosure policy.

1 no-brainer electric vehicle stock to buy for $200 now Originally published by The Motley Fool