In China, electric-vehicle sales are on fire, jumping nearly 146% year-over year in May to over 190,000. Consequently, EVs accounted for an impressive 12% of all vehicle sales there. Meanwhile, Europe’s EV sales are also soaring, and multiple factors should cause the growth of EV sales in the U.S. to jump sooner rather than later. Given all of these points, for growth investors, many EV stocks are worth buying now.
But on the other hand, the valuations of other electric-vehicle stocks are quite high. In a few cases, they’re clearly excessive.
For example, Canoo (NASDAQ:GOEV) is in turmoil and has very little revenue, but it still has a market capitalization of $2 billion. Workhorse (NASDAQ:WKHS) and Lordstown (NASDAQ:RIDE), both of which will have trouble surviving, nonetheless sport market capitalizations of well over $1 billion. Lucid (which is set to merge with Churchill Capital Corp IV (NYSE:CCIV) and Fisker (NYSE:FSR) have near-zero revenue and less-than-overwhelming order totals. But their market capitalizations are around $40 billion and $4.5 billion, respectively.
On the other end of the spectrum are these four stocks, which are all trading meaningfully under their medium-term potential:
EV Stocks: Electrameccanica Vehicles (SOLO)
In a recent interview with Benzinga, Electrameccanica CEO Paul Rivera told the website that “many” entities with whom the automaker has spoken, including small towns, “national corporations,” and everything in between, are interested in trying out the company’s one-seat EV, the Solo.
Also notably, the company recently launched construction of a new factory in Arizona. And finally, as I’ve pointed out previously, way back in 2018, before the EV craze kicked off in earnest and prior to the Solo getting a great deal of publicity, the company reported that its orders had reached 64,000 EVs, representing “potential sales” of $2.4 billion. Of those pre-orders, about 23,000 were for the Solo.
Cumulatively, the information that I outlined in the paragraph above suggests that my theories on the strengths of Electrameccanica and of the Solo are on target.
And yet, the market capitalization of SOLO stock is a relatively tiny $397 million.
In a July 1 statement, Ayro CEO Rod Keller reported that the automaker was experiencing “strong demand” from its “fleet customers.”
As I’ve noted previously, Ayro’s partnerships with Gallery Carts, a huge distributor of food trucks, and Club Car, a leading manufacturer of mid-size utility vehicles for local deliveries, leave it exceptionally well-positioned to get large shares of the low-speed delivery and food truck markets.
Further, Ayro seems to have some first-mover advantages in those markets, as they are somewhat unique niches. And unlike many other prominent EV startups, the company has already sold and is delivering a meaningful amount of its vehicles.
In fact, in Q1, Ayro’s top line came in at nearly $800,000, while its backlog was $314,000.
The market capitalization of AYRO stock is slightly over $151 million, making the shares an extremely cheap EV stock.
EV Stocks: Arrival (ARVL)
I believe that Arrival is better positioned than any other publicly traded EV start-up.
After Congress bailed out states and cities earlier this year, they have plenty of funds to buy electric buses, including those being made by Arrival. Due out by the end of this year, the company’s buses could really impress Wall Street and many municipalities.
Last month, Barclays began Arrival stock at an “overweight” rating, noting that the company’s microfactory system may disrupt the sector. The firm set a $25 price target on the shares.
I agree with Barclays’ optimism on Arrival’s microfactory system, and Arrival’s initial deal with UPS for 10,000 delivery vans is impressive.
Arrival has an $8 billion market capitalization.
From a technical standpoint, the Chinese EV maker’s upgraded smart SUV sounds very impressive. According to Seeking Alpha, among its features are an “autonomous driving assistance system,” “an upgraded in-car infotainment system” powered by a Qualcomm (NASDAQ:QCOM) chip, and “a full-scenario voice assistant which supports continuous dialogue and customized voice commands.”
Already one of the leaders of the Chinese electric SUV market, the EV should generate significantly higher sales going forward.
Given its already very strong EV sales and its technical adeptness, Xpeng is poised to benefit from the rapid growth of China’s high-end EV market.
And having already established a beachhead in Europe (in the form of its recent penetration of the Norwegian market), Xpeng looks poised to get a boost from that continent’s surging EV sector.
In fact, Ernst and Young last month predicted that Europe would remain the leading EV market through 2031.
With its market capitalization of over $32 billion, XPEV stock is by far the most expensive of the EV stocks on this list. But given its combination of strong technology, relatively high sales compared to most other EV start-ups, and its exposure to Europe and China, I think that the shares are undervalued at their current levels.
On the date of publication, Larry Ramer held long positions in ARVL stock, SOLO stock and AYRO stock.
Larry has conducted research and written articles on U.S. stocks for 14 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Among his highly successful contrarian picks have been solar stocks, Roku, and Snap. You can reach him on StockTwits at @larryramer. Larry began writing columns for InvestorPlace in 2015.