It’s tough to look at Tesla (NASDAQ:TSLA) and not think that the stock is this generation’s Apple (NASDAQ:AAPL) or Amazon (NASDAQ:AMZN). At a market capitalization of $412 billion, it is the most valuable automaker in the world. Not Toyota (NYSE:TM), not General Motors (NYSE:GM), not Fiat Chrysler (NYSE:FCAU), but Tesla, a company that has yet to turn a profit on an annualized basis. So, you can understand why investors are always on the lookout for the next Tesla.
Despite lacking the fundamentals, TSLA stock surged close to 480% by the end of June. From a valuation perspective, the stock is extremely expensive, but we get it. Elon Musk is a very charismatic figure, and his exploits and personality have a knock-on effect on each of his companies.
Moreover, anything related to electric vehicles is red-hot right now, and the go-to stock remains TSLA.
But that is where this list comes in. Although Tesla seems to be the top stock in the EV space, several companies are vying to become the next Tesla.
Here are five of those that are exciting:
- Nio (NYSE:NIO)
- Workhorse Group (NASDAQ:WKHS)
- Nikola (NASDAQ:NKLA)
- ElectraMeccanica Vehicles (NASDAQ:SOLO)
- Arcimoto (NASDAQ:FUV)
The Next Tesla: Nio (NIO)
Most people in the U.S. are unfamiliar with Nio, often dubbed the “Tesla of China.” It has flown under the radar because it has less of a global presence and is more focused on China. But shares are enjoying a sizable rally in 2020 due to the hoopla surrounding the EV sector and excellent quarterly numbers.
In the second quarter, the electric vehicle champion achieved record quarterly deliveries of 10,331 cars, despite a challenging environment. Revenue jumped 139.4% year-over-year, and adjusted losses per American Depositary Share (ADS) came in at 15 cents, beating Wall Street’s estimate of a 26-cent loss.
Outside of the bumper numbers, there are other growth catalysts for Nio stock. China, the world’s largest country, wants to make sure new-energy vehicles represent one-fifth of total auto sales by 2025. A bulk of those sales will have to come from Nio.
But before investing in this one, there are a couple of things that you should keep in mind. Chinese companies are notorious for accounting malpractices. Look no further than the recent fraud case involving Luckin Coffee (OTCMKTS:LKNCY) for an example. So, there is an element of risk when investing in them.
Valuation is also an issue, as Nio stock is trading at historic highs at this point. Like much of the industry, I think shares are a bit overvalued, so look out for an excellent entry point before adding shares to your portfolio.
Most EV makers are relatively new entrants to the market. That is why it may seem surprising that Ohio-based Workhorse has been around since 1998.
It did not always make electric delivery vans. However, the company is now one of the foremost suppliers of EV trucks and drones.
With shares trading at $29.30 as of this writing, the company has a market cap of nearly $3.1 billion. Considering such a rich valuation, many investors may be skeptical about dipping their toes in. But the stock is an excellent investment nonetheless.
There are also a few catalysts for WKHS stock that could push it to the stratosphere. Speculation is rife that the company could end up winning the $6 billion United States Postal Service (USPS) next-generation delivery truck contract. Ohio is a swing state, and President Donald Trump understands the importance of winning there in November. That is why bulls are confident that Workhorse will get the nod, so WKHS stock is on a tear.
Hence, even though shares are relatively expensive, it will be prudent to load up before key developments push shares higher.
The Next Tesla: Nikola (NKLA)
NKLA stock is an exciting play, as it is down by almost 35% in the last month. Shares were rising exponentially due to short-term speculation after a reverse merger with VectoIQ, but they have cooled down. The company does plan to make passenger cars, but it is better known for its 18-wheeler trucks.
Unlike its peers, Nikola has not sold anything yet. It expects to sell its first battery-electric vehicle, or BEV, by 2021, and lease its fuel cell electric vehicles by 2023. This is one of the main reasons why the stock continues to crater. Still, its market cap is a testament to how highly valued the company is despite the non-existent sales.
Trading at a forward EV-sales value of 103.8 times, NKLA stock is for investors that can stomach waiting for an extended period before strategies materialize. Nikola is an interesting company but definitely speculative at this stage. If you are up for taking on risk, this is the stock for you.
ElectraMeccanica Vehicles (SOLO)
Speaking of taking on a bit more risk, we have ElectraMeccanica Vehicles. A bit different than the rest of the entries on this list, the company is not making passenger cars or trucks. Instead, it is focusing on a vehicle design that has one passenger seat and three wheels.
The vehicles will have a minimal impact on the environment, and that is its unique selling point. The stock is currently trading for $2.48 per share, a significant discount to its 52-week high of $6. It has undergone substantial peaks and valleys for several quarters, but at the moment, shares are trading at a relatively attractive entry point.
As is the case with other EV makers, SOLO stock is trading at steep multiples and has yet to turn a profit. But you are buying into a concept with this company. If you believe in the long-term potential for this type of vehicle, I suggest you go ahead and dip your toes in since shares are cheaper than where they were at the start of the year.
The Next Tesla: Arcimoto (FUV)
Our final entry comes from Eugene, Oregon, and like ElectraMeccanica Vehicles, it is a fun one. Arcimoto manufactures three-wheeled electric vehicles that look more at home in a toy shop than in a showroom. However, the Fun Utility Vehicle (FUV) is street legal, and first responders, along with law enforcement, use variations of the EV.
Perhaps the most significant selling point is that the company is operating within its niche market. While Tesla, Nikola and more established names fight it out for supremacy in the consumer space, FUV stock can carve its little slice from the larger EV pie.
Just keep one thing in mind. It is better to buy shares when they are closer to their 52-week low of 97 cents. As I write this, the stock is on its way up and is changing hands for $6.45. Although not as steep as its 52-week high of $8.89 per share, it is still a bit on the higher side for me.
On the date of publication, Faizan Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Faizan Farooque is a contributing author for InvestorPlace.com and numerous other financial sites. He has several years of experience analyzing the stock market and was a former data journalist at S&P Global Market Intelligence. His passion is to help the average investor make more informed decisions regarding their portfolio.