Why Rivian, Nikola, and Lucid Stocks Got Wrecked on Friday

Shocker: Investors want to see profits, and these companies don’t have any to show them.

What happened

Oh, well. It was worth a try. In early trading Friday, stock markets attempted to make a comeback and at least end a losing week on a winning note. But after turning briefly green in the morning hours, all the major stock indexes are in the red again — with electric vehicle (EV) stocks notable among the decliners. As of 12:25 p.m. ET, shares of Rivian Automotive (RIVN -2.33%) are off 4.9%, Nikola (NKLA -3.11%) stock is down 5.8%, and Lucid Group (LCID -4.57%) — the beneficiary of positive news as recently as yesterday — is giving back most of its gains, and leading the sector 6.8% lower today.

So what

It probably comes as small consolation that there’s no obvious bad news about the electric car and truck makers driving today’s downturns. There’s not a peep about any of Rivian, Nikola, or Lucid on the newswires today. Financial news websites today are filled with headlines worrying aloud about the potential for a recession and the actuality of the fact that the S&P 500 just officially crossed the line into a bear market, having fallen 20% from its high point hit on Dec. 27, 2021. Price-to-earnings ratios, it seems, are falling as investors worry over the prices they’ve been paying for currently unprofitable stocks that may not earn any actual profit for years to come — by which time the value of those profits may have been eroded by inflation.

Now what

Which brings us back to Rivian, Nikola, and Lucid. As data from S&P Global Market Intelligence confirm, not one of these electric vehicle start-ups has yet become profitable. Moreover, analysts polled on their prospects predict that Nikola won’t turn in its first profit under generally accepted accounting principles (GAAP) before 2027, Rivian won’t turn profitable before 2028, and Lucid, well, to be honest, no analysts are currently looking far enough out to foresee a profit for Lucid. (The longest forecast on record only goes to 2025, and unsurprisingly, analysts still see Lucid losing money in that year.) 2027 is also the year that both Rivian and Nikola are expected to stop consuming cash, and begin generating positive free cash flow so that they can fund their own operations internally. Unfortunately, five years feels like a long time to wait for profits on a day like today. It’s no surprise, therefore, that a lot of investors right now might be thinking it’s better to cut their losses on the moonshots, shift their money into value stocks instead, and sleep a little better at night for a change.