Electric vehicle (EV) shares took the market by storm in November. Tesla shares broke above $1,000 and others also saw a lot of interest. Both Rivian (NASDAQ:RIVN) and Lucid Motors (NASDAQ:LCID) saw strong short-term gains. However, since the middle of November these top EV stocks are off their highs. Rivian is down 34% from the peak, with Lucid down 33%. Is this the dip for me to buy?
Caught up in risk sentiment
The top EV stocks have moved lower for a different reasons. First, the Lucid Motors share price tanked recently due to news regarding an SEC investigation. In a regulatory filing, the company said that there was a request of “production of certain documents related to an investigation”. This appears to be regarding the nature of how the company went public via a SPAC (special purpose acquisition vehicle). However, this hasn’t been confirmed, so we’ll just have to wait and see.
Rivian stock doesn’t seem to have been hit due to company specific news. In fact, most of the market is still looking ahead to upcoming results in order to gauge the future direction of the company. However, the share price appears to have suffered from broader risk sentiment.
In recent weeks, the discovery and rise of the Omicron variant has spooked some investors. During periods of uncertainty, people tend to sell high-risk growth stocks. The money then usually goes towards defensive stocks as a safer place to weather a potential storm. I would definitely classify Rivian as a high-risk stock. Since the IPO only a month ago, the stock had been volatile as investors try to place an accurate value on the business.
Risks and rewards of top EV stocks
One reason why I might decide to buy the potential dip is if I believe in the long-term future of EVs. With global government initiatives around the environment and higher consumer awareness around electric vehicles, I think demand will continue to grow. These top EV stocks are likely to be leaders in the sector. Clearly, others such as Tesla have a head start. But the potential market is huge and so could easily be shared among a selection of manufacturers.
Another reason why I could consider buying now is if I’m optimistic on the outlook for 2022. These high-risk stocks will continue to be influenced by sentiment around Covid-19 and the health of the global economy. So if I think that Omicron isn’t something to be seriously concerned about, now could be the time to buy. If we’re in a positive risk environment next year then I’d hope the share prices of these top EV stocks should be higher.
What about potential risks? I think a big one is the fact that both Rivian and Lucid are at an early stage of production. Their business models are somewhat untested when it comes to seeing how they can handle reaching scale. It could take several years to reach a mass level that enables the companies to become profitable.
But I would consider buying these top EV stocks today. However, I’d invest 50% now and then hold off on the other 50% to see how the stocks trade over the next few weeks.
