This past year, shifting consumer demands in the alternative energy space have had a significant effect on investor sentiment. Many governments have also been providing incentives for green-energy companies. As a result, electric vehicle (EV) stocks and battery stocks have seen significant returns.
Recent metrics highlight that, in 2020, global EV sales came to more than 3.2 million for the year. Meanwhile, the International Energy Agency (IEA) recently revealed plans for “the world’s first comprehensize roadmap to net-zero emissions by 2050.”
All in all, batteries are an extremely crucial component of the EV ecosystem — an ecosystem that is definitely growing. Many analysts concur that the businesses developing and improving battery technology will be the real winners in the industry moving forward.
So, with all that information in mind, here are seven battery stocks that offer investors significant high-growth potential:
- Albemarle (NYSE:ALB)
- Glencore (OTCMKTS:GLNCY)
- Panasonic (OTCKTS:PCRFY)
- Quantumscape (NYSE:QS)
- Romeo Power (NYSE:RMO)
- Sociedad Química y Minera de Chile (NYSE:SQM)
- Vale (NYSE:VALE)
Battery Stocks for Electric Vehicles: Albemarle (ALB)
52-week range: $52.69 – $188.35
One-year price change: Up about 162%
Dividend yield: 1.06%
First up on this list of battery stocks, Albemarle is one of the world’s largest lithium producers. Of course, lithium-ion batteries are increasingly used in EVs. As a metal, lithium is lightweight and has high energy density. Moreover, analysts currently debate about how much is left in the world, a fact that adds to the price volatility in companies that produce or use the metal.
Albemarle also manufactures highly engineered specialty chemicals and operates three segments: Lithium and Advanced Materials, Bromine Specialties and Refining Solutions. The company’s customers come from various industries, including petroleum refining, consumer electronics, energy storage, construction, automotive and more. Currently, lithium makes up close to 40% of its total revenue (Page 5).
Back in February, the company reported fourth quarter and full year 2020 results. Net sales were $879 million, a decline of about 11% year-over-year (YOY). Net income of $84.6 million also meant a decrease of 6.4% YOY. Additionally, earnings per diluted share was 79 cents. By the end of 2020, Albemarle had an estimated liquidity of over $2.1 billion while its total debt stood at $3.6 billion. CEO Kent Masters cited:
“Albemarle reported another solid quarter with Q4 2020 adjusted EBITDA exceeding outlook […] As we continue to rebound from last year’s pandemic-related lows, we are accelerating high-return growth in our Lithium and Bromine businesses and maintaining our focus on operational discipline to drive cost and efficiency improvements.”
ALB is expected to increasingly benefit from the booming EV market. Many analysts forecast that lithium supply will struggle to meet demand over the next decade. However, ALB stock’s forward P/E and P/S ratios are 41.70 and 4.99, respectively, pointing to a frothy valuation level. Given the volatility in the markets, a potential decline toward $140 would improve the margin of safety for this stock.
52-week range: $2.83 – $8.67
One-year price change: Up about 145%
Dividend yield: 1.63%
Glencore is one of the world’s largest commodities traders, active in markets for metals and minerals, energy products and agricultural goods. It also provides global sourcing, logistics, storage and financing services to commodity producers and consumers.
The company reported Q4 and full year results in February. Revenue was $34.7 billion in the fourth quarter, representing a 34% YOY decline. Adjusted EBITDA remained the same as the previous year at $11.6 billion in 2020. The company also ended the year with a net loss of $1.9 billion, compared to a net loss of $404 million in the previous year. However, CEO Ivan Glasenberg noted:
“Today, the business, with its portfolio of commodities and activities, is uniquely positioned for the expected resource needs of the future […] [W]e are ready to support the transition to a low-carbon economy and realise our ambition of achieving net-zero by 2050.”
Altogether, GLNCY stock has increased rapidly over the past year. Soaring copper prices as well as an increasing demand for nickel — another battery metal — have been among the chief catalysts.
Right now, the stock’s forward P/E and P/S ratios are 8.79 and 0.25, respectively. For this pick of the battery stocks, though, further upside is possible in the months ahead.
52-week range: $6.84 – $14.55
One-year price change: Up about 81%
Dividend yield: 1.87%
Next on this list of battery stocks, Panasonic is a Japanese conglomerate that has five main business units: appliances, life solutions (lighting, housing systems and solar panels), connected solutions (PCs, factory automations and in-flight entertainment systems), automotive (infotainment systems and rechargeable batteries) and industrial solutions. In other words, the group has a well-diversified revenue stream.
Panasonic reported consolidated financial results for the nine months ended Dec. 31, 2020. As a result of the pandemic, sales decreased by 15% to 4,873 billion yen ($44.8 billion) from a year ago. Net income declined by 27% to $1.2 billion. Earnings per diluted share for the nine months was 51 cents, compared to 70 cents in the previous year. Finally, free cash flow improved by $1.7 billion from a year ago to an inflow of nearly $2.9 billion.
Many investors might initially think of Panasonic as a low-margin consumer electronics business. However, it has actually become a producer of higher-margin car electronics and batteries for EVs. For instance, it manufactures batteries for Tesla (NASDAQ:TSLA) and Toyota (NYSE:TM). Now, analysts expect the battery business to become profitable in the coming quarters.
Currently, PCRFY stock’s forward P/E and P/S ratios are 15.24 and 0.48, respectively. For this name, long-term investors could consider buying the dips.
52-week range: $9.74 – $132.73
Price change (since September 2020): up about 336%
Dividend yield: N/A
Right now, QuantumScape is one of the hottest battery stocks to come out of the special purpose acquisition company (SPAC) space. That’s because it’s focusing on the technology to mass produce solid-state lithium-metal batteries, which are highly regarded for their longer range and shorter charging times. The technology, if successful, is actually expected to halve charging times.
However, the technology that QS is developing still remains several years away from commercialization. Put another way, this is a pre-revenue company. And its road to success is not a sure one.
Like most SPAC reverse-mergers, QS stock has been extremely volatile in the past six months. It is a momentum stock, mostly driven by industry news. Therefore, short-term traders need to be cautious if they ride the waves of this EV-battery startup. Now below $50, though, the current share price makes QS much more attractive for buy-and-hold investors.
Romeo Power (RMO)
52-week range: $8.42 – $38.90
One-year price change: Up about 15.36%
Dividend yield: N/A
Another SPAC, Romeo Power focuses on designing lithium-ion battery modules and packs for commercial EVs. Of course, the North American commercial vehicle market is a large one, including a wide range of vehicles. Like QS, this company’s objective is to manufacture longer-lasting batteries, too.
Currently, RMO has very little revenue. But, it does have over $500 million in contracted revenue. Management highlights their ongoing relationship with most Class 8 vehicle manufacturers stateside. For instance, auto-parts supplier BorgWarner (NYSE:BWA) and industrial group Republic Services (NYSE:RSG) are investors in the company.
Romeo is expected to report earnings for the quarter ending December 2020 after market close on Mar. 30. Therefore, the shares are likely to be volatile in the days ahead. At this point, RMO stock is a speculative, high-risk but high-return play. This pick of the battery stocks needs time before it can create significant shareholder value. Recently, though, Cowen initiated coverage of the shares with a price target of $18.
Sociedad Química y Minera de Chile (SQM)
52-week range: $20.46 – $60.74
One-year price change: Up about 158%
Dividend yield: 1.37%
Sociedad Química y Minera de Chile is a South American commodities producer with operations extending to lithium, potassium fertilizers, iodine and solar salts. However, SQM management has been investing heavily in lithium production capacity in particulae.
The company reported fourth quarter and full year results in early March. Revenues for Q4 totaled $514 million, an increase of approximately 9% YOY. Net income of $67 million translated into earnings per share (EPS) of 25 cents. On the results, CEO Ricardo Ramos stated:
“The fourth quarter was not only the quarter with the highest operating margin of the year, but it also set a historical record for lithium sales volumes […] Our lithium sales volumes rose more than 40% in the year despite the market growing approximately 6%, proving that we have indisputable competitive advantages related to production costs and capacity, logistics response and high-quality production.”
SQM stock’s forward P/E and P/S ratios of 45.23 and 6.32 point to a frothy valuation level. So, long-term investors might consider waiting for a pullback below $50 for this pick of the battery stocks.
52-week range: $7.36 – $19
One-year price change: Up 119%
Dividend yield: 7.10%
Our final name on this list, Vale, comes from Brazil. The group is one of the world’s largest producers of iron ore and pellets, raw materials that are key for steelmaking and other processes. Vale also produces copper, coal, nickel, cobalt and much more.
The company reported fourth-quarter results in late February. Total revenue was $14.8 billion, a 49% increase from the prior-year period. On top of that, Vale generated $4.9 billion in free cash flow from operations during Q4. The company ended the year with nearly $14.3 billion in cash.
VALE stock’s forward P/E and P/S ratios are 4.37 and 1.66. All told, interested investors should consider buying this one of the battery stocks on the dips.
On the date of publication, Tezcan Gecgil did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Tezcan Gecgil has worked in investment management for over two decades in the U.S. and U.K. In addition to formal higher education in the field, she has also completed all 3 levels of the Chartered Market Technician (CMT) examination. Her passion is for options trading based on technical analysis of fundamentally strong companies. She especially enjoys setting up weekly covered calls for income generation.