If you have money to invest but believe there aren’t any bargains right now since stock market indices are hitting all-time highs, wait until you hear about the stocks that have missed the rally and seem prime to rebound. Two perfect examples are Rivian Automotive (NASDAQ: RIVN) and Nio (NYSE: NIO) — both stocks are down 45% so far in 2024.
Although global demand for electric vehicles (EV) continues to grow, the industry has faced multiple headwinds, including falling subsidies, high interest rates, and rising competition from China. To top that, companies like Rivian and Nio have had their own set of challenges, all of which combined to send their stock prices tumbling.
The good news is that both EV makers appear to be at an inflection point now, with strong catalysts ahead that could send their shares higher. Here’s why now’s the time to buy these two stocks.
Nio’s Tesla challenger is a must-watch
Neha Chamaria (Nio): Nio is a prominent luxury-EV maker in China, which gives the company an edge over U.S. automakers trying to find a place for themselves in the world’s largest EV market. Yet a price war earlier this year crippled the Chinese EV industry, forcing most companies, including Nio, to offer discounts and cut prices on their EVs to survive.
The timing couldn’t have been any worse for Nio as it was upgrading its models to a new platform and already facing low production and deliveries. Nio’s margins tanked, and the stock plunged more than 50% in the first half of 2024.
Nio’s latest numbers, however, offer a glimmer of hope. With the upgrades behind the company, Nio’s deliveries shot up by 91% sequentially to 57,373 units in its second quarter. In Q2, Nio’s vehicle sales surged 81% sequentially to around $2.2 billion, vehicle margin rose to 12.2% from 9.2% in the first quarter, and net loss dipped slightly from Q1 to around $694 million.
With Nio’s deliveries and margins expected to stabilize, its stock should have more upside from here than downside. The company aims to deliver 61,000-63,000 EVs in the third quarter and boost its margin to 15% by the end of the year.
Nio is also tapping the mass EV market with its sub-brand Onvo and expects to start deliveries of the first model under the brand L60 SUV later this month. L60 will challenge EV-leader Tesla‘s hot-selling Model Y in China with a lower price point and more features.
Onvo is the most interesting development at Nio right now, and if L60 catches the attention of EV enthusiasts, Nio stock could find a solid catalyst in the coming months.
A transition period for Rivian
Howard Smith (Rivian): Many EV companies have been struggling this year. With interest rates at the peak of the current cycle and elevated competition, sales growth has dropped for many and disappeared for some. That’s led to a 45% drop in shares of Rivian this year.
But the company is at a turning point in its business, and that might make the sharp stock decline a good long-term opportunity for some investors. You’ll need a hefty appetite for risk to invest in Rivian, but let’s look at what could go right in the near future.
Rivian has already been evolving and upgrading its EV technology with the second generation of its fully electric consumer pickup truck and SUV. But the R1T and R1S models remain niche products that generally appeal only to high-net-worth EV buyers. Based on second-quarter revenue, excluding regulatory credits, Rivian’s nearly 13,800 vehicles delivered in the quarter each sold for an average of almost $83,000.
Rivian is getting closer to having a more affordable fully electric SUV available. Its R2 model is scheduled to begin shipping in early 2026 with a starting price of $45,000. Importantly for investors, the company should also have sufficient capital to reach the point where the R2 begins bringing in revenue because Rivian announced a new partnership with global automaker Volkswagen that included a large influx of capital.
Volkswagen will first invest $1 billion in Rivian in the form of a convertible bond with the intent to eventually convert that into Rivian common stock. The German automaker could add up to another $4 billion that would be used to accumulate more Rivian stock and form a joint venture (JV) for sharing EV technology development.
The formation of the JV is expected before the end of this year. That could be a catalyst for investors to gain interest in buying Rivian stock as it gets ready to start production of the R2 SUV. Now may be the time to add shares before the upcoming catalysts take hold.
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Howard Smith has positions in Nio, Rivian Automotive, and Tesla. Neha Chamaria has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla and Volkswagen. The Motley Fool recommends Volkswagen Ag. The Motley Fool has a disclosure policy.
2 Hot Stocks Down 45% to Buy Right Now was originally published by The Motley Fool
