Electric vehicle (EV) stocks have taken a hammering lately, prompting bubble-burst concerns. That’s because valuations for most electric vehicle stocks have skyrocketed in the past few years, based purely on their potential rather than their fundamentals. Now over the past few months, though, nearly every EV company has dropped more than 20% of their value from their all-time highs.
However, the EV bubble has been building up for quite some time now, so it’s hardly surprising. For example, Chinese EV maker Nio has a market capitalization that’s roughly 80% of General Motors, yet GM sells more cars profitably in a week than Nio has sold as a company. A lot of this is also attributable to the outsized returns of Tesla (NASDAQ: TSLA), whose shares rose more than 600% last year. Though electric vehicle stocks have been killing it in unison, their market caps have become detached from their fundamentals.
All that said, though, some companies are likely to survive the bubble burst and push against the incoming adversity. So, let’s look at a few of the most promising EV names.
- Canoo (NASDAQ:GOEV)
- Fisker (NYSE:FSR)
- Ford (NYSE:F)
- General Motors (NYSE:GM)
- Li Auto (NASDAQ:LI)
- Nio (NYSE:NIO)
- Xpeng (NYSE:XPEV)
Electric Vehicle Stocks to Buy: Canoo (GOEV)
Canoo is arguably the most disruptive of the electric vehicle stocks in the market. Its business model is based around the fast-growing subscription economy, which will increase its profit margins and the lifetime value of its vehicles. Additionally, its cars come with a unique “skateboard” technology which allows for highly efficient production.
The company plans to start producing EVs in 2022, with plans for three models including a lifestyle vehicle, a multi-purpose delivery vehicle and a pickup truck. It projects its 2024 revenues to be upwards of $1.4 billion. Additionally, it plans to scale production from 10,000 vehicles in 2022 to 95,000 in 2025.
Canoo’s business model will likely catch on with consumers looking to avoid a lump-sum payments and other related costs associated with an EV purchase. That’s because the company offers vehicle subscriptions with no long-term commitment. Therefore, GOEV stock is one of the most fascinating plays in the sector, with a massive upside potential.
Fisker is an American EV company that is run by legendary car designer Henrik Fisker. He’s having another crack at the EV market after his previous company collapsed due to invariable reasons. However, the new and improved Fisker promises to be different with an asset-light model and a focus on innovation. FSR stock has been one of the more resilient electric vehicle stocks of late, with a three-month return of about 28%.
Like Canoo, the company also has plans to release its flagship EV — the Fisker Ocean SUV — in 2022. The car comes with a starting price of $37,500 and uses third-party manufacturers instead of an in-house operation. Therefore, the company is able to focus purely on technology and design, outsourcing its manufacturing completely.
Despite the challenges, Fisker is progressing nicely so far through effective strategic planning. As a result, total reservations are up roughly 400% since mid-October. That makes FSR stock appear to have a great future ahead.
Automotive giant Ford has stumbled in the past couple of years from an operational standpoint. However, a new CEO, production expansion and a focus on its EV division will likely help turn things around for the company.
The new CEO, Jim Farley, has set a new direction for the company to lower costs and improve its product offerings. Additionally, the goal is to expand its EV division and focus on production on a much more global scale.
Of course, 2020 has been a tough year for the company, but it expects to pick up the pace this year. Consensus estimates suggest that revenues and earnings should rise 24% and 180% respectively in 2021. Electric vehicles should play a significant role in that expansion of revenues. Additionally, Ford has the leverage to scale production much more easily than other companies and electric vehicle stocks. Therefore, EV investors should definitely have F stock on their radars this year.
General Motors (GM)
General Motors is embracing change and now making its long-awaited entry in the EV sector. Though it doesn’t have a first mover’s advantage like Tesla, it has the scale to produce EVs with impeccable quality. As a result, GM stock is one of the best value stocks in the sector, with its three-month returns in excess of 38%.
General Motors is investing heavily into converting its traditional plants to EV production. It plans to launch over 30 EVs by 2025. Some of these launches include the Cadillac Lyriq and the 2022 Chevy Bolt Electric Utility Vehicle (EUV).
This company’s competitive advantages in marketing, distribution and manufacturing give it the edge to produce EVs at a higher volume with lower costs. Therefore, it will be able to realize higher profit margins than other EV makers. I wouldn’t be surprised if GM stock proves to be one of the best performing electric vehicle stocks in the future.
Li Auto (LI)
Li Auto is one of the fab three Chinese EV giants. Despite the pandemic’s challenges, it has beaten analyst estimates for its revenues and earnings in the past couple of quarters.
Now, this company has already kicked off 2021 with a bang in the fast-growing Chinese market. Moreover, LI stock has grown impressively in the past six months, growing by a little over 57%. Li also started the year with well over 5,000 Li One deliveries in January, representing growth of over 355% year-over-year (YOY).
The competitive advantage that Li has over others is its strong margin profile. For instance, its fourth-quarter gross margins were at a remarkable 17.5% as well as 16.4% for the whole year. Those margins should remain elevated this year as well, which well help the company break even. So, needless to say, this is definitely one of the electric vehicle stocks to keep an eye on.
Next up on this list of electric vehicle stocks, Nio is the industry leader in the Chinese EV market. It had a bumper 2020, with deliveries in excess of 43,000, more than double total deliveries in 2019 . It also has one of the most potent EV lineups in China and continues to expand revenues and improve cost metrics. Moreover, in 2021, Nio is expected to pick up from where it left 2020 off, with even stronger delivery numbers.
Recently, Nio reported its Q4 and posted revenue growth of well over 130% on a YOY basis. Its vehicle deliveries were roughly 17,400 for the quarter, too, representing a significant increase from the prior-year period. And the cherry on top? Strong margins in excess of 17%.
Finally, though, 2021 should be another strong year for the company, especially based on its January deliveries which grew 352% YOY. Altogether, Nio has built substantial brand equity in the domestic market, solidifying its position as the leader. Therefore, NIO stock will continue to provide massive gains for its investors for the foreseeable future.
Xpeng is one of the fastest-growing Chinese EV makers out there and a staunch rival of Tesla. The company has numerous similarities in its design, technology and charging network to the industry juggernaut. However, it has also witnessed an unmatched surge in demand for its cars, which is why XPEV stock is expected to create massive shareholder wealth.
Recently, XPEV announced its Q4 results, where deliveries were up 303% YOY. Additionally, the full-year deliveries of over 27,000 units represented a 112% increase from 2019.
Looking ahead, analysts expect Xpeng to more than double its 2020 revenues to roughly $2 billion. Therefore, despite the intense competition, this pick of the electric vehicle stocks has held its own, performing consistently well in the sector.
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article
Muslim Farooque is a keen investor and an optimist at heart. A life-long gamer and tech enthusiast, he has a particular affinity for analyzing technology stocks. Muslim holds a bachelor’s of science degree in applied accounting from Oxford Brookes University.