Batteries are big business — especially when it comes to the ones needed to power the electric vehicles that promise to take over the world in the next decade. And that’s good news for battery stocks. As governments move aggressively to fight climate change and reduce our reliance on fossil fuels, the worldwide market for batteries was estimated at $120.4 billion last year (2020) and is forecast to reach $279.7 billion by 2027.
It has a compound annual growth rate (CAGR) of 12.8% over the seven year period, according to Research and Markets. The huge demand for batteries is fueling a whole crop of companies that include electric vehicle manufacturers, infrastructure developers, and mining and extraction concerns.
As the battery revolution proceeds full steam ahead, we look at three of the best battery stocks to bet on for 2022.
Best Battery Stocks: ChargePoint Holdings (CHPT)
President Joe Biden’s administration is spending $7.5 billion to expand electric vehicle charging to underserved areas of the U.S. And that’s good news for Campbell, California-based ChargePoint Holdings, which operates the largest electric vehicle charging station network in America and Europe.
Today, ChargePoint has more than 118,000 charging locations across North America and continental Europe, and its network is growing all the time. The company also boasts more than 5,000 commercial and fleet customers, including three-quarters (75%) of Fortune 50 companies.
ChargePoint’s rapid growth and market leading position is leading to positive financial results. The company’s fiscal second-quarter results showed revenue of $56.1 million, up 61% year-over-year. Of that total revenue, $40.9 million came from networked charging, which was up 91% from a year earlier. ChargePoint is doing so well that it raised its full-year guidance by 15% to the midpoint of a $225 million to $235 million range.
Sadly, the company’s strong growth and financials are not reflected in its current share price. At $25.60, CHPT stock is down 32% on the year after going public via a reverse merger with a special purpose acquisition company (SPAC) this spring.
Analysts seems to agree that CHPT stock is undervalued. The median price target on the shares is currently $30, suggesting a potential 18% gain from current levels — which is good for this battery stock.
Chinese electric vehicle maker Nio is pioneering a “battery-as-a-service” approach that is proving extremely popular in its domestic market. Instead of paying to have a battery included in the initial cost of one of Nio’s luxury electric vehicles, customers can opt to pay a monthly subscription fee that is about the same as it costs to buy gas for a regular car.
Having paid the subscription fee, Nio customers simply bring their vehicle into one of the company’s garages when its battery is depleted and a machine removes the drained battery and replaces it with a freshly-charged one. It’s similar to how people swap out empty barbecue propane tanks for filled ones at a gas station.
This innovative approach has two advantages. First, it helps make Nio’s luxury EVs, which cost anywhere from $70,000 to $120,000, more affordable to consumers. And second, the battery as a service model provides Nio with a steady and predictable source of revenue.
The company now has more than 550 battery swap stations in China, as well as a recently opened one in Norway, its first foreign market. Nio isn’t saying how much money it makes on the battery swap service, but the company has said the subscriptions have contributed substantially to its $1.5 billion in quarterly revenue.
NIO stock has also struggled, down 18% year-to-date at $40.56 per share. However, many analysts remain bullish on the Chinese electric vehicle maker and its shares. The median price target on Nio stock is $58.25, suggesting a potential 44% gain from its current level.
Best Battery Stocks: Albemarle (ALB)
Charlotte, North Carolina-based chemical manufacturer Albemarle is another battery stock that is worth owning. And unlike the other companies on this list, ALB stock has been killing it this year, up 83% since January at $274.43 a share. In the past 12 months, the stock has nearly doubled.
The sharp increase has been due to huge demand for the lithium and bromine chemicals that Albemarle produces — which are used to manufacture batteries for electric vehicles and other products. Albemarle has operations around the world and is the largest global provider of lithium for electric vehicle batteries.
In its most recent quarter, Albemarle reported earnings per share of $3.62 which was four times bigger than the $0.80 per share the company earned in the same quarter of 2020, which showcases the huge demand for its products. In September, Albemarle took a big step towards further increasing its lithium production output by acquiring the Chinese company Guangxi Tianyuan New Energy Materials for $200 million. The deal is expected to close early next year and should help Albemarle further cement its position as the leader when it comes to lithium and bromine chemical production.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Joel Baglole has been a business journalist for 20 years. He spent five years as a staff reporter at The Wall Street Journal, and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia.