Tesla Stock Selloff continues, and EV values ​​make no sense

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The sell-off of growth stocks accelerated on Tuesday, dragging Tesla and other electric vehicle stocks. Stocks have bounced off the bottom, but one consequence of the sell-off is that EV valuations are now scattered all over the place.

It is difficult to decipher what the market is trying to tell investors.

The

Nasdaq Composite

fell about 3% in early trading on Tuesday after falling 2.5% on Monday.

Tesla

stock (ticker: TSLA) was down nearly 11%, but then clawed back to a decline of about 2% from 10:50 ET. The Nasdaq and

S&P 500

are now down 1.9% and 0.4% respectively.

Inflation is a new concern for investors, and fast-growing stocks tend to be hit harder when inflation expectations rise. Higher inflation means higher interest rates. Dividends and bond yields become slightly more attractive in that scenario, rather than cash flows from fast-growing companies that may be down the road for years to come. High interest rates also make it more expensive to finance growth.

Inflation isn’t the only thing going on Tuesday with EV stocks. Lucid Motors agreed to merge with the acquisition company Churchill Capital Corp IV (CCIV). The merger is a triumph for the EV industry – sort of. Investors are bidding a little too high on shares of the SPAC that merge with Lucid betting the deal is coming. That made Lucid worth about $ 96 billion, based on Monday’s price, before the merger was even announced. On Tuesday, Churchill’s shares fell more than 30%. But even with such a big drop, Tuesday’s prices still value Lucid at over $ 60 billion, making it the eighth most valuable automaker in the world. Lucid has yet to sell a vehicle.

Lucid is now trading for about 4 times the company’s projected 2025 revenue of about $ 14 billion. Projections in this case are not estimates – they are Lucid’s internally generated numbers. Tesla, by comparison, is trading for about 7 times its estimated 2025 sales of about $ 120 billion. That estimate is an average of several Wall Street analysts.

Digging a little deeper into EV ratings only makes things more confusing.

Fisker

(FSR), which will revenue $ 13 billion by 2025, is valued at a fraction of that amount. The reason for the valuation gap is difficult to determine.

Lucid lists impressive specs and battery tech, including an estimated range of 500 miles per charge for its Lucid Air luxury sedan due out later this year. Lucid is also run by former Tesla engineer Peter Rawlinson. But the Ocean, Fisker’s first model, promises to be an affordable SUV, and Fisker is run by legendary car designer Henrik Fisker. In addition, Fisker works together with an experienced car builder,

Magna International

(MGA), to assemble the ocean.

The difference between Fisker and Lucid isn’t the only strange comparison. There is a relatively wide range of valuations for the three Chinese EV manufacturers with significant sales:

NIO

(NIO),

XPeng

(XPEV), and

Li Auto

(LI). Those three are also traded at a large discount to Tesla based on figures from 2025.

With a valuation range of roughly 0.5 to 7.5 times the estimated sales in 2025, the right valuation level for EV stocks is probably somewhere. It’s just hard to know where exactly. And by 2025, there will be EV winners and losers too – it’s just hard to know who.

Write to Al Root at [email protected]