Lucid Group Inc. (LCID) vs. Stellantis (STLA): Which Auto Stock Has Better Value? Despite short-term macroeconomic uncertainties, the auto industry is poised for long-term growth, supported by the increasing demand for commercial and electric vehicles. While leading auto stocks Lucid Group (LCID) and...
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Despite short-term macroeconomic uncertainties, the auto industry is poised for long-term growth, supported by the increasing demand for commercial and electric vehicles. While leading auto stocks Lucid Group (LCID) and Stellantis (STLA) should benefit, let us determine which auto stock has a better value.
In this piece, I have evaluated two auto stocks, Lucid Group, Inc. (LCID) and Netherlands-based Stellantis N.V. (STLA), to determine which could generate better returns. After thoroughly evaluating these stocks, I think that STLA represents a favorable investment opportunity with better value for the reasons discussed in this article.
With rising demand for both personal and commercial vehicles and an increasing consumer focus on safety and environmental concerns, the auto industry is well-positioned for robust growth in the foreseeable future.
Moreover, the adoption of robotics across the supply chain is also gaining momentum, leading to high levels of automation. This trend is driving the development of tools based on Artificial Intelligence (AI) to augment quality, speed, and the ability to meet consumer demands, thereby ensuring the industry remains competitive.
As a result, the global automotive market is expected to grow to $28.70 billion by 2030 at a CAGR of 4.5%.
STLA is a clear winner in terms of price performance, with 50.9% gains over the past nine months compared to LCID's 36.5% decline. Moreover, STLA has gained 42% over the past year, while LCID has plunged 60.3%.
Here are the reasons why we think STLA could perform better in the near term:
Recent Developments
On June 26, 2023, LCID announced that it had entered into a definitive agreement to establish a long-term strategic technology partnership with Aston Martin to accelerate the iconic British brand's high-performance electrification strategy and long-term growth.
Conversely, on June 27, 2023, STLA launched Free2move Charge, a 360-degree ecosystem that will seamlessly deliver charging and energy management to address all electric-vehicle (EV) customer needs, anywhere and in any way. Managed by the new Stellantis Charging & Energy Business Unit, Free2move Charge addresses electric-vehicle customers' needs at home, at work, and on the go.
On June 26, STLA announced a strategic partnership with Utilimaster, a leading go-to-market brand of The Shyft Group's Fleet Vehicles & Services business unit, as they expand their services into Mexico.
Recent Financial Results
During the fiscal year ended December 31, 2022, STLA's net revenues increased 20.2% year-over-year to €179.59 billion ($197.04 billion). Its operating income rose 32.3% from the prior-year period to €20.01 billion ($21.95 billion). The company's net profit increased 18.1% year-over-year to €16.78 billion ($18.41 billion). Also, its EPS came in at €5.31, representing an increase of 17.7% year-over-year.
On the contrary, LCID's loss from operations increased 29.2% year-over-year to $772.16 million for the first quarter that ended March 31, 2023. Its net loss and net loss per share attributable to common stockholders rose 28.9% and 19.4% from the previous-year quarter to $779.53 million and $0.43, respectively.
Past And Expected Financial Performance
LCID's revenue increased at a CAGR of 409.8% over the past three years. Its revenue is expected to increase 54.7% this year, 139.5% in the about-to-be-reported quarter ended June 2023, and 35.6% in the current quarter. However, its EPS is expected to fall 12% in the June 2023 ended quarter.
Conversely, over the past three years, STLA's revenue grew at a 44.9% CAGR. Also, its EPS grew at a 39.6% CAGR during the same period. Analysts expect STLA's revenue to rise 6.3% this year, 11.5% in the June 2023 ended quarter, and 26.2% in the current quarter. Its EPS is expected to grow by 2.8% in the next year.
Valuation
In terms of trailing-12-month P/S, STLA is currently trading at 0.28x, lower than LCID, which is trading at 17.99x. STLA's trailing-12-month EV/Sales multiple of 0.28 is lower than LCID's 17.32. Additionally, STLA's trailing-12-month Price/Book ratio of 0.62x is lower than LCID's 6.37x.
Thus, STLA is relatively more affordable.
Profitability
STLA is more profitable, with a trailing-12-month gross profit margin of 19.66% compared to LCID's negative 171.54%. In addition, STLA's trailing-12-month net income margin of 9.35% compares to LCID's negative 286.13%.
Furthermore, STLA's trailing-12-month ROCE, ROTC, and ROTA of 26.27%, 13.88%, and 9.02% compare to the LCID's negative 53.68%, 28.57%, and 27.58%, respectively.
POWR Ratings
LCID has an overall rating of F, translating to a Strong Sell in our proprietary POWR Ratings system. Conversely, STLA has an overall rating of A, which equates to a Strong Buy. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. LCID has an F grade for Value. LCID's forward EV/Sales and P/S multiples of 17.32 and 17.99 are significantly higher than the 1.16 and 0.85 industry averages.
On the other side, STLA has an A grade for Value. STLA's forward EV/Sales and P/S multiples of 0.16 and 0.28 are 86% and 67.1% lower than the 1.16 and 0.85 industry averages.
Among the 55 stocks in the Auto & Vehicle Manufacturers industry, LCID is ranked last, while STLA is ranked #8.
Beyond what we've stated above, we have also rated both stocks for Growth, Momentum, Stability, Quality, and Sentiment. Click here to view LCID ratings. Get all STLA ratings here.
The Winner
The automotive industry stands to benefit from rising demand for personal and commercial vehicles, the accelerating transition to electric vehicles (EVs) driven by heightened consumer awareness of environmental issues, and the seamless integration of cutting-edge technologies. Industry players such as LCID and STLA are well-positioned to capitalize on these industry tailwinds.
However, given LCID's relatively weak financial performance, low profitability, and elevated valuation multiples, its competitor STLA emerges as a more favorable investment choice.
Our research shows that the odds of success increase when one invests in stocks with an Overall Rating of Strong Buy or Buy. View all the top-rated stocks in the Auto & Vehicle Manufacturers industry here.
What To Do Next?
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STLA shares rose $0.07 (+0.39%) in premarket trading Tuesday. Year-to-date, STLA has gained 26.06%, versus a 15.83% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
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