Better Stock: Lucid vs. Rivian? (Hint: Unit Economics and Gross Profits Are Key.)
Rivian and Lucid share many things in common, but the former has drastically improved its gross profitability, while Lucid has been stuck in neutral.
Overview
Investors would certainly love to find the next high-flying Tesla stock, which made many long-term shareholders wealthy. Right now, the electric vehicle (EV) industry is slowly gaining traction after fuel economy regulations were relaxed and the $7,500 federal EV tax credit ended, and that gives investors a chance to gauge EV investments and potentially start a position before the industry accelerates forward, and eventually, it will. When comparing two young EV makers, Rivian (NASDAQ: RIVN) and Lucid (NASDAQ: LCID), one of the most important factors is gross profitability.
Here's how the two compare, and why it matters.
Details
Gross profitability is hugely important for young companies such as Rivian and Lucid. Gross profitability is simply how much profit a company makes after paying the direct costs to create its product or services, in this case, EVs (mostly); more on this later. It proves to investors that the core business model is sound before adding other expenses and complications. It's also important to attract more investors, which increases demand for the stock and raises its price, as they'll see the investment as more long-term viable.
Source
Originally published at www.fool.com.