Nicholas (NASDAQ:NKLA) disappointed many investors after going public by merging with a special purpose acquisition company (SPAC) four years ago. The electric tractor-trailer maker repeatedly missed its own delivery estimates, its founder and former CEO Trevor Milton was convicted of securities and wire fraud, and it recalled almost all of its vehicles after a series of battery fires. It has also nearly tripled its share count over the past four years to raise more cash.
In 2023, Nikola delivered only 79 battery-powered electric semi-trucks (BEVs) and 35 hydrogen-powered fuel cell trucks (FCEVs). This was well below the 3,500 BEV and 2,000 FCEV it initially claimed it could deliver in 2023 in its pre-merger presentation. It only generated $36 million in revenue during the year, but posted a net loss of $966 million. This equates to an average net loss of $8.5 million per vehicle delivered.
Nikola shares have already fallen 99% from their all-time high, but their enterprise value still stands at $708 million. That’s still more than 4 times the “$150 million to $170 million” in total truck revenue it expects to generate in 2024. Analysts expect it to post a net loss of $498 million. dollars for the year, which is a grim situation for a company that has gone out of business. its last quarter with $346 million in cash and equivalents. So instead of betting on Nikola long-term recoveryinvestors should consider investing in a Chinese electric vehicle manufacturer that has a much brighter future: Li Auto (NASDAQ:LI).
Why is Li Auto a better buy than Nikola?
Li initially sold plug-in hybrid electric SUVs, but launched its first battery-powered electric vehicle (EV), the Li Mega minivan, earlier this year. Its SUVs start at around $35,000, while its Mega minivan costs around $78,000.
Li Auto began delivering its first vehicles in 2019, and its deliveries skyrocketed over the next three years. Things calmed down in 2022 as China’s electric vehicle industry faced tougher supply chain, macroeconomic and competitive challenges, but its growth accelerated again in 2023 after overcoming most of these challenges. Its vehicle margin also hit a record high during the year, suggesting that its focus on the niche PHEV segment has shielded it from the ongoing price war in China’s electric vehicle market.
Metric | 2020 | 2021 | 2022 | 2023 |
|---|---|---|---|---|
Deliveries | 32,624 | 90,491 | 133 246 | 376,030 |
Growth | N / A* | 177% | 47% | 182% |
Vehicle margin | 16.4% | 20.6% | 19.1% | 21.5% |
Data source: Li Auto. *Deliveries start in December 2019.
Li’s strong sales growth and increased margins allowed it to become profitable under generally accepted accounting principles (GAAP) in 2023. For 2024, analysts expect its revenue to increase by 24% as it continues to deliver more vehicles. However, they expect its EPS to decline by 31% as it ramps up Mega shipments, increases production capabilities, launches new marketing campaigns, and expands its national network of proprietary shippers.
But in 2025, analysts expect Li’s revenue and EPS to increase by 45% and 71%, respectively, as the company reaps the rewards of these investments in a better macroeconomic environment. We should take these estimates with a grain of salt, but Li’s stock looks very cheap, at 18 times forward earnings and less than 1 times this year’s sales.
Is now a good time to buy Li Auto stock?
Li is trading at such a low valuation because escalating technology and trade tensions between the United States and China are keeping many investors away from Chinese stocks. But if you think the two sides can eventually resolve their differences peacefully, then this could be a great time to buy Li’s stock while the bulls are still looking in the other direction.
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Leo Sun has no position in any of the stocks mentioned. The Motley Fool has no position in any of the securities mentioned. The Mad Motley has a disclosure policy.
Forget Nikola, Buy This Gorgeous Stock of Electric Vehicles Instead was originally published by The Motley Fool
