Vroom Vroom

Welcome to the 22^nd Edition of In Conversation with Pika World. In this latest edition, we will maintain the clean format with a quick glance on a hot topic of the week.

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The week is nothing short of exuberant information and events. The inflation fear is back, and the bear seems to be unleashing once again. However, volatility did not stop investors from buying the dip. Electric vehicles return as a highlight of the week as we welcome the IPO of Rivian Automotive.

After discussing price inflation at great length during the week, Pika World will finally discuss our favourite: the EV sector and our plan ahead.

The Rivian Automotive IPO was a success on any scale. It had caught up to become the second most valuable automaker in the US, just behind Tesla and well ahead of General Motors and Ford Motor.

As the EV markets expand, there is sufficient space and money to be made for uprising EV companies. On Pika World’s radar, we focus on five main competitors: NIO, XPeng, Li, Rivan and Lucid. An investor’s main challenge is to consider which company to pick as their best bet.

Valuation is the natural criteria that come into our minds. Unfortunately, many Wall Street’s analysts have yet to come up with a conclusive sales forecast for Rivian. One estimate is that the company could probably achieve $10 billion in sales by 2023. This is achievable with a sale of around 150,000 trucks and some commercial vehicles through a deal with Amazon. With that, Rivian will have a price that is 10 times its estimated 2023 sales.

Now, what about the rest of the EV companies?

Lucid, a recent Pika World hot favourite, is trading around 30 times its estimated 2023 sales forecasts. XPeng and NIO trade at about 7 times while Li is at 5 times. Tesla is in the region of 15 times. Such multipliers seem rosy compared to the conventional S&P 500 index, which is estimated at 2.8 times. The Russell 1000 Growth Index trades about 4.8 times. Thus, there seems to be high optimism on the EV companies given their rich valuation.

Looking at the multiple, we can see that Lucid seems to be an expensive bet. On the contrary, Chinese EV appears to be relatively cheaper, and Rivian is in the middle of the pack. As one article wrote, how do we know which to pick? The most direct way is to identify what Americans like to buy.

The truck appears to be the love of the people. In fact, consistent with our previous update, SUVs and trucks are large markets for vehicle makers. Nonetheless, we cannot ignore the massive Chinese EV markets, which are also more developed and subsequently at a higher competitive level.

Rivian is the contemporary news on a buy call for investors looking for an alternative to Tesla. On the flip side, among the Chinese EVs, XPeng seems to be in a sweet spot. Despite being slightly more expensive than Li and smaller than NIO, it produces more vehicles models than Li and is growing slightly more aggressively than NIO.

Pika World will be looking at long term accumulation in the sector as we recover from the shock of Tesla’s setback in our portfolio and prepare ourselves for the exciting leap forward!