Barclays Plots Roadmap Of EV 'Megatrends': Why Tesla Is King, Rivian Is Runner-Up And The Wheels Are Turning At Ford, GM

Barclays is out with extensive coverage on several automakers Wednesday. Here's a look at the key initiations and the main drivers behind the firm's multifaceted call. 

What's Turning The Wheels For Barclays? Tesla Inc TSLA stood out as the king of the road for Barclays. Analyst Dan Levy initiated coverage on the Elon Musk-led company with an Overweight rating and set a price target of $275, citing its favorable position in the firm's "Two Clock" framework.

"We believe that TSLA’s clear lead in both the global EV transition and the emergence of the software-defined vehicle, as well as positive trajectory on volume, should lead to outperformance for the stock," Levy wrote in a new note to clients.

See Also: Elon Musk Gave Nearly $2B Worth Of Tesla Shares To Charity In 2022

Tesla's strong financial position puts it in a favorable position on "one clock." On the other hand, it's leading the EV transition, Levy said.

"Despite the questions which emerged around TSLA amid its solid underperformance through the later part of 2022, we believe TSLA remains the clear leader," the Barclays analyst said.

Tesla doesn't have to deal with the same cost that legacy automakers making the transition to EVs face. In turn, the company has a significant margin lead, he said. 

Levy acknowledged near-term questions surrounding further price cuts and margin normalization may continue to pressure the stock. He also noted with the stock up more than 70% to start the year, some of the short-term rally was likely over, especially if the Fed continues to raise rates.

"That said, strong underlying fundamentals combined with a valuation that appears far more reasonable than historical levels provides an attractive opportunity," Levy said.

The Barclays analyst also initiated Rivian Automotive Inc RIVN with an Overweight rating and announced a price target of $28, noting the company was well positioned to take share in the North American EV market.

Although Rivian faced an uphill battle ahead in figuring out how to ramp capacity and navigate the road to profitability, Levy saw Rivian parked in the sweet spot of two key automotive megatrends: electrification and software-defined vehicles.

"We are hard-pressed to see any company in the auto landscape as the 'next Tesla,' as Tesla has been quite unique in its accomplishments. That said, if we were to identify any of the start-up EV automakers as the closest to Tesla, we believe it would be RIVN," the Barclays analyst said.

Levy highlighted Rivian's unique product and noted the company sits in its own lucrative niche of premium outdoor/adventure EVs.

"And while it still must prove that it can expand beyond this niche into a wider market opportunity, we believe the early feedback on product has been rather encouraging," Levy said.

Due to some of the aforementioned challenges legacy automakers face, Levy initiated Ford Motor Co F and General Motors Company GM with Equal-Weight ratings. He slapped a $13 price target on the former and a $46 target on the latter. 

"Conversely to the examples above, Ford and GM serve as key examples where balancing the two clocks is more of a dilemma," the analyst said.

See Also: Ford Pares Stake In EV Maker Rivian After Reporting Significant Write-Down

He acknowledged current sales of the internal combustion engine (ICE) vehicles will help fund the pair of Detroit-based automakers' long-term initiatives, but their current strategy is disconnected from their ultimate goals. 

"We believe this balancing act will be a key challenge for Ford and GM through the decade," Levy said.

Despite the challenges ahead, the analyst applauded the steps GM has taken to balance the "Two Clocks" approach. And while Ford is behind GM in the transition, Levy believed there is a fire underneath current management that sparked urgency in the team, which should continue to bode well for the legacy automaker moving forward.

TSLA, RIVN, F, GM Price Action: At time of publication, Tesla was up 1.98% at $213.39 and Rivian was up 7.67% at $20.99. GM was last up 0.94% at $42.84, while Ford was down 0.66% at $12.89.

Photo: courtesy of Tesla.