The once-hot electric vehicle market cooled this year as investors take a more reserved approach to the sector that promises to replace our gasoline-powered cars with battery powered ones over the next decade. People have become more discerning when it comes to electric vehicle stocks.
It is no longer enough for a company to simply use the acronym “EV” to attract investor dollars. This is the sign of a maturing market. And it comes at a time when the battery technology that powers electric vehicles is growing leaps and bounds.
Established automakers and start-up companies are working to improve the charging times, capacity and range of electric vehicle batteries, understanding that batteries are critically important to the mass market adoption of electric cars, trucks and sport utility vehicles (SUVs).
As battery technology surges forward, we look at four electric vehicle stocks for investors to add to their portfolios.
Electric Vehicle Stocks: XPeng (XPEV)
Let’s begin with one of the lesser-known Chinese electric vehicle manufacturers, XPeng. While Nio and Li Auto (NASDAQ:LI) tend to get more attention, XPeng has been doing some exciting things lately.
The company, headquartered in Guangzhou, China, just reported that its sales this April jumped 285% from a year earlier. The company delivered 5,147 electric vehicles in April and 18,487 vehicles in the first four months of this year. XPeng’s P7 electric sedan and compact electric SUV are proving to be quite popular with consumers in China.
Buoyed by the strong sales, XPeng recently announced plans to open a new manufacturing plant with an annual production capacity of 100,000 vehicles. It’s also opening new vehicle dealerships across China, the world’s largest electric vehicle market.
The growth and expansion has led Deutsche Bank to upgrade its rating on XPEV stock to “buy” with a price target of $48 a share. That price target suggests an 83% upside.
Year-to-date, the stock is down 40%. Investors should consider it to be on sale at current levels.
Nio (NIO)
China’s top automaker, and the main rival to Tesla, remains Nio. The Shanghai automaker continues to lead China’s electric vehicle market with monthly deliveries in April of 7,102, up 125% from the same month of 2020. Four months into the year, Nio has already delivered more than 20,000 electric vehicles.
Despite that success, Nio spooked investors and analysts recently when it announced that the ongoing shortage of microchips will slow its vehicle deliveries in the current second quarter.
Yet despite the challenges posed by the global microchip shortage, Nio has confirmed that it’s still on track to launch its first sedan, the ET7, in the first quarter of 2022, and the company has announced plans to begin selling its electric vehicles in Norway this September, its first foray into a market outside of China.
Vehicle margin, a measure of profitability, rose to 21.2% in the first quarter of the year, up from 17.2% in the previous quarter. NIO stock has been hurt by the broad pullback in electric vehicle stocks, down 45% since early February.
But this company’s stock should find a bottom soon and reverse to the upside.
Electric Vehicle Stocks: ChargePoint (CHPT)
Investing in ChargePoint is an act of faith at this point. But CHPT stock is the kind of security that will reward patient investors.
The Campbell, California-based company that operates the world’s largest network of electric vehicle charging stations has been hit by a double whammy this year. Not only has the company’s stock been hurt by the move away from the electric vehicle sector, but ChargePoint went public in March of this year via a special purpose acquisition company (SPAC) right when the downturn in those types of deals hit full force.
The result is that CHPT stock is down 46% year-to-date at $21.50 per share. Not great. However, there is reason for optimism and for investors to take a long-term approach with this stock. The company forecasts that its electric vehicle charging network will grow to 2.5 million stations globally by 2025 from 115,000 at the end of last year. ChargePoint also forecasts revenue growth of 60% annually through 2026.
If those numbers aren’t reason to hold CHPT stock, consider that the electric vehicle charging infrastructure market worldwide is forecast to be worth $56.9 billion by 2026 and $190 billion by 2030, according to Polaris Market Research. That’s a lot of growth in less than a decade.
Tesla (TSLA)
It’s still difficult to talk about electric vehicle stocks and not discuss Tesla. The Silicon Valley company remains the global leader when it comes to the manufacture of electric vehicles. Despite rising competition and persistent bearish sentiment, Tesla continues to defy expectations.
In this year’s first quarter, the company run by CEO Elon Musk reported record net income of $438 million, as well as earnings of 93 cents per share on $10.39 billion in revenue. This despite the global shortage of semiconductor chips that has hobbled other automakers.
Musk has reiterated that Tesla remains on track to deliver its new Model S sedan this spring and its Model X electric vehicle will begin shipping in this year’s third quarter as planned. Additionally, Tesla is pushing into China, giving local electric vehicle manufacturers XPeng, Nio and Li Auto a run for their money in their home market. The bottom line is that Tesla is not ceding its crown in the electric vehicle space anytime soon.
TSLA stock has been trading sideways and consolidating since the end of January, down 28% in that time. Its fortunes should improve with the broader electric vehicle market later this year.
On the date of publication, Joel Baglole held long positions in NIO and CHPT. He did not hold, either directly or indirectly, any other positions in the securities mentioned in this article.
