Why Rivian Stock Raced Higher in 2023, but Shares of Nio and Nikola Drove Lower

While electric vehicle (EV) sales accelerated considerably higher in 2023 compared to 2022, investor sentiment regarding individual EV companies varied greatly. Slightly outpacing the S&P 500‘s 24% rise, Rivian (RIVN -3.88%) stock, for one, rebounded last year after plunging 82% in 2022. Nio (NIO -3.11%) and Nikola (NKLA -4.85%), however, didn’t enjoy the same success, extending the 69% and 78% slides they suffered in 2022, respectively.

According to data provided by S&P Global Market Intelligence, Rivian stock rose 27% in 2023, while Nio slipped 7%, and Nikola slid 60%.

Investors hitched a ride with Rivian, yet they let Nio and Nikola pass them right by

Through the first half of 2023, Rivian extended the fall it had suffered in 2022, but the stock turned a corner over the summer. At the beginning of July, Rivian announced second-quarter 2023 production of 13,992 vehicles, representing a quarter-over-quarter increase of 50%.

The company also reaffirmed its outlook that it would produce 50,000 vehicles in 2023. Some months later, in November, Rivian charged up investors’ excitement when it reported third-quarter 2023 financial results. Beating analysts’ revenue estimates of $1.31 billion and a $1.33 loss per share, Rivian reported $1.34 billion on the top line and an adjusted loss per share of $1.19.

Like Rivian, Nio’s stock heated up over the summer when the company announced plans to develop a presence in the Netherlands, and an analyst revealed a bullish price target. But, unlike Rivian, Nio’s stock subsequently stumbled and failed to recover.

The company disappointed investors in August with its second-quarter 2023 financial results. In addition to a year-over-year decline in vehicle deliveries, Nio reported a decline in revenue compared to both the first quarter and the same period in 2022. In September, investors pumped the brakes again when the company announced plans to issue at least $1 billion in debt to help keep the lights on.

From the start of the year through August, Nikola investors had high hopes for this hydrogen stock, with it soaring more than 57%. However, The stock’s rally ran out of gas and began a precipitous fall that would last throughout the year.

On Aug. 4, the stock’s stumble began when Nikola reported lackluster second-quarter 2023 financial results and that the company would be appointing a new CEO. The dog days of summer took an even greater bite out of the stock shortly thereafter when the company revealed plans to issue $325 million in debt. Feeding the bears even further, Nikola announced it was issuing a recall for its battery-powered vehicles.

The rocky road Nikola suffered in August continued into November, when it reported poor Q3 2023 earnings. Missing analysts’ expectations that it’d report a loss of $0.15 per share, Nikola reported an adjusted loss per share of $0.30. It also revealed that its previously announced recall would cost the company about $62 million. Weeks later, Nikola reported it was tapping the debt markets again. This time, it planned on issuing $200 million in convertible bonds.

With 2023 in the rearview mirror, is now a good time to steer these EV stocks into your portfolio?

After Rivian’s impressive performance in 2023, EV-minded investors may wonder whether it’s too late to pick up the stock for themselves. Since the company is still unprofitable, traditional valuation metrics aren’t helpful. Nonetheless, the stock’s climb in 2023 shouldn’t preclude investors from digging deeper into the company, as there are plenty of reasons to believe shares can continue to power higher.

By changing lanes and turning one’s attention to Nio, investors should recognize that the company’s poor performance in 2023 — and into the early days of 2024 — may offer an opportunity to grab a compelling growth stock at a lower price point. Of course, potential potholes remain for Nio stock, but those with a higher tolerance for risk may want to consider parking Nio stock in their portfolios.

On the other hand, Nikola stock, which has crossed into penny stock territory, has too many red flags surrounding it to consider it a buy. The potential of hydrogen-powered vehicles may rev some investors’ engines, but Nikola has continued to flounder recently, and there’s no certainty that the company can turn things around in the near future.