With environmental and sustainability concerns coming into focus this past year, electric vehicle stocks have seen some strong momentum. The shift from gasoline to battery-powered cars is now a fast-growing trend in the auto sector. Because of that, traditional automakers are moving aggressively towards electrification while fresh-on-the-scene electric vehicle (EV) companies work on innovative new technologies.
So, EVs have received widespread support. Still, they continue to have their challenges. For one, charging stations remain scarce, which in turn limits the duration of travel. Adding to this, electric cars typically come at higher price tags. However, the U.S. government has introduced a $7,500 tax credit to help bridge this gap. Long-term, more affordable vehicle options and the greater adoption of EVs will level the playing field between gasoline and electric.
Right now, 2021 is set to be a breakout year for EVs, as investors and automakers remain optimistic about the future. While the tech selloff and global chip shortage have put pressure on prices, EV makers still show a lot of runway for growth.
Here’s a look at seven stocks that currently have a “strong buy” rating from analysts:
- Tesla (NASDAQ:TSLA)
- General Motors (NYSE:GM)
- Nio (NYSE:NIO)
- Xpeng (NYSE:XPEV)
- Li Auto (NASDAQ:LI)
- ChargePoint (NYSE:CHPT)
- Niu Technologies (NASDAQ:NIU)
Electric Vehicle Stocks to Buy: Tesla (TSLA)
Despite concerns over its frothy valuation, Tesla remains the undisputed leader of the EV market. The company had a stellar 2020, delivering almost 500,000 vehicles and continuing progress on its two “gigafactories” in Berlin, Germany and Austin, Texas. These two items demonstrate Tesla’s effort to expand production capacity and create greater economies of scale. According to Tesla, the Model Y will be produced at the two new facilities.
Coming into 2021, Tesla’s price rally cooled considerably amidst the tech selloff, but several catalysts point toward a bright future. In the first quarter of this year, the EV maker reported some impressive earnings and hit a record number of deliveries. Tesla plans to keep this momentum going with the launch of its newly designed Model S, which can sustain greater lengths of travel and boasts a range of around 400 miles.
Although critics have pointed to TSLA stock’s lofty valuation — which is currently at 130.6 times forward price-earnings (P/E) — the long-term potential of the market still makes this pick of the electric vehicle stocks great.
General Motors (GM)
Next up on this list of electric vehicle stocks is a legacy name in the auto industry: General Motors.
As you may know, traditional automakers have been piling into electrification en masse lately. GM is among the top names leading this trend.
Currently, GM stock is up almost 50% this year, as investors and analysts remain optimistic about its future. The company’s impressive lineup of EVs includes the Chevrolet Bolt. That model is touted as being a more affordable option in comparison to Tesla’s cars. It operates on GM’s high-performance Ultium battery.
Given this company’s potential to bring EVs to the mass population, GM has received several buy ratings from analysts. As reported by Barron’s, the average price target is $70 — a nearly 14% increase from today’s price of $61.59.
This is also higher than the average analyst price targets for companies in the S&P 500. So, the rosy outlook and sheer technological prowess of electric vehicle stocks like this one are sound reasons to get behind GM.
Electric Vehicle Stocks to Buy: Nio (NIO)
Widely considered to be the “Tesla of China,” Nio is one of the top names in the EV market right now.
In Q1 2021, this EV maker based in China reported 20,060 deliveries, which was up a whopping 423% from the prior-year period. A major reason for this spike was the company’s SUV offering, which includes three models.
While Nio may be an EV leader in China, the company is also actively working to expand its global presence. For example, the company announced its entry into Norway on May 6, providing its ES8 and ET7 models. Additionally, Nio hopes to eventually extend into the U.K. and other parts of Europe if there’s enough interest in the region.
These tailwinds have led to optimistic ratings on the Street, with analysts giving NIO stock a price target of nearly $62 according to Tipranks. At its current price just above $44, this represents roughly 39% upside. So, given all of its massive potential, I would call NIO a stock to buy and hold for the long haul.
After months of price volatility, XPEV stock has seen a lot of upside in recent months amidst greater optimism towards the Chinese EV market. For the past three months, XPEV is up nearly 33%.
This company’s biggest advantage lies in its market positioning. Unlike Tesla and Nio, Xpeng’s more affordable vehicles are designed to cater to middle-class consumers. So, the growing size of China’s middle-class population positions the company to capitalize on a greater share of the market. Its current lineup features both an SUV and a sedan.
Moreover, XPEV shares moved higher in the past month after the company reported May deliveries of 5,686 vehicles, up 10% from its April number. This much-needed boost comes after a global chip shortage and lofty valuations dampened EV stock prices. However, taking the long-term view, analysts covering this stock remain optimistic.
According to Barron’s, 68% of analysts give Xpeng a buy rating. With several catalysts working for it — such as high deliveries and a large addressable market — this name is one of the top electric vehicle stocks to buy this year.
Electric Vehicle Stocks to Buy: Li Auto (LI)
Next up on this list of electric vehicle stocks is another Chinese EV maker worth rallying behind: Li Auto.
Shares of this company rose after Li announced its Q1 2021 results. However, while the numbers did beat analyst estimates, they weren’t too impressive. Like many of its peers in the EV sector, LI stock was plagued by the global chip shortage and production timelines. This resulted in a marginal increase in revenue (sales rose YOY but decreased from Q4 2020) as well as lower deliveries in May. That said, the current investor optimism in LI stock really stems from a recent update instead — one that hints at better days in the near future.
In a recent press release, Li Auto stated that “positive feedback and strong recognition” took its May orders to a “record high.” The company believes that this order inflow will allow them to beat delivery guidance by a strong margin in Q2. Current guidance for the quarter is set at 14,500 to 15,500 vehicles.
So, with plenty of upsides ahead, the recent slight dip in LI makes now a good time to pick up shares.
Of course, we can’t talk about electric vehicle stocks without talking about what will power these vehicles. The markets haven’t ignored this either, though: as EVs have approached mainstream adoption, there’s also been a lot of buzz around EV infrastructure. This is because the true integration of EVs into society will need to be met with technology to support that rollout.
Enter Chargepoint. This company manufactures EV charging stations and is one of the only businesses of its kind to be traded publicly. And true, CHPT’s revenue growth in fiscal 2021 was dismal — but the company has picked up the pace for fiscal 2022.
For example, in its recent Q1 report, CHPT recorded a more than 23% increase in revenue year-over-year (YOY). However, maybe its most impressive metric was its guidance in Q4 2021, which estimated 37% growth in revenue for fiscal 2022. Today, Chargepoint is confident that it can hit these targets and also remain cash-rich, with $615 million on the books as of Q4.
As a market leader in North America — and with a growing presence in Europe — CHPT stock is no doubt one of my top electric vehicle stocks to play.
Electric Vehicle Stocks to Buy: Niu Technologies (NIU)
Unlike Tesla and Nio, which operate in industries with a large addressable market, Niu’s product caters to a niche but fast-growing sector. This company manufactures electric smart scooters and pedal bikes.
Although maybe not as exciting as electric cars, electric bikes and scooters have gained major momentum in recent years as they serve as a great way to travel short distances within cities. This demand was reflected in Niu’s most recent earnings report. The company noted blowout Q1 sales in China, which offset lower international sales. Overall, e-scooter volume rose by 273% for the period.
True, electric vehicle stocks are generally on the decline after the sector staggered a bit. However, the recent dip makes it the perfect time to add NIU stock to your portfolio. This is because the company has plenty of market share left to capture in China.
With many regions in the country still recovering from the pandemic, Niu could gain greater revenue as the headwinds dissipate. Additionally, the global electric scooter market is still nascent. It’s expected to expand at a compound annual growth rate (CAGR) of 7.7% in the next decade.
On the date of publication, Divya Premkumar did not have any position (either directly or indirectly) in any of the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Divya Premkumar has a finance degree from the University of Houston, Texas. She is a financial writer and analyst who has written stories on various financial topics from investing to personal finance. Divya has been writing for Investor Place since 2020.