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3 Top Alternatives to Investing in Tesla for the Risk-Averse

Key Points

  • Despite being the biggest name out there, shares of Tesla don’t come across as cheap.
  • Instead of feeling pressured to buy Tesla shares after a significant rally, investors should consider other alternatives.
  • Here are three listed alternatives that will appeal to every type of investor.
  • 5 stocks we like better than Tesla

With Tesla Inc (NASDAQ: TSLA) shares having already surged nearly 200% this year, many investors may be cautious about chasing the stock’s current price. While it’s always desirable to buy shares at a discounted price, that’s not the case with Tesla right now unless you firmly believe in the company’s future growth trajectory. 

The price-to-earnings (PE) ratio of the electric vehicle giant has already doubled from the end of last year, as momentum has favorably shifted towards the bulls. However, there’s more to the EV stocks market than just Tesla. Here are three alternatives that may offer the feeling of buying at a bargain price.

Ford is arguably Tesla’s biggest and closest competitor. Despite a sluggish start in the electric vehicle market, Ford is now producing nearly 10,000 electric vehicles per month. In August alone, their U.S. sales included approximately 7,000 units, an increase of 18% compared to the previous year. Ford’s shares, however, have not performed well recently, trading sideways since May of last year. Nevertheless, there are indications of a potential breakout in the near future. Bears have been unable to push Ford shares below $11 despite multiple attempts, which suggests that the bulls may soon take control. Joseph Spak, an analyst at UBS, recently upgraded his rating on Ford shares from Neutral to Buy. He sees a growing $20 billion opportunity for the company through planned upgrades and price increases. His price target of $15 indicates a potential upside of at least 20% from Wednesday’s closing price.

Rivian is an interesting alternative. While its shares are currently recovering from all-time lows reached in April, it holds significant potential among all the EV stocks listed here. Last month, Rivian surpassed analysts’ expectations with its Q2 earnings report, which showed a staggering 208% year-on-year growth in revenue. In the quarter, Rivian sold more than 12,000 vehicles, and the company’s outlook was optimistic enough to boost forward guidance. Although the stock is still trading 85% lower than its all-time high, it presents an attractive opportunity. Fundamentally and materially, Rivian has never been in a stronger position. Its production is ramping up at a rate of 50% per quarter, revenue is at record highs, and the company is getting closer to profitability. Analysts like Mizuho have set price targets such as $32, suggesting a further potential upside of almost 40% from current levels. This would put Rivian shares at their highest level since the end of last year, supporting the idea that the recovery rally is just getting started.

Similar to Rivian, Nio is another emerging EV stock gaining momentum. However, Nio’s fundamentals are not as promising. Its Q2 numbers, released two weeks ago, showed a 15% year-on-year contraction in revenue, with a decline in vehicle deliveries. This declining trend makes it difficult to get excited about Nio when there are other options available. Despite cooling off in recent weeks, Nio’s shares are still up over 30% from the low in May. MarketBeat’s MarketRank Forecast tool predicts a further potential upside of at least 26% from current levels. While Nio is the riskiest option among the alternatives to Tesla, it also carries the greatest upside potential. Nio’s shares are currently undervalued to the extent that any sign of improvement in the coming quarters could trigger a significant recovery rally. With nearly 20,000 vehicle deliveries in August, Nio is clearly onto something big; it just needs better execution from its management. It would be wise to exercise caution with Nio at the moment. Waiting for the shares to dip back down towards $8 or for key metrics to start trending upwards in the next earnings report could be a more prudent approach.

While Tesla currently has a “Hold” rating among analysts, top-rated analysts believe these five stocks are better buying opportunities.

View The Five Stocks Here

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