When it comes to valuation and value, EV stocks are all over the map. There are names that have important advantages but stretched valuations; Lucid (NASDAQ:LCID) and Tesla (NASDAQ:TSLA) are in that category.
On the other hand, multiple companies with many difficult problems still have unwarranted valuations of close to $1 billion or more. I’m primarily talking about Canoo (NASDAQ:GOEV), Workhorse (NASDAQ:WKHS) and Lordstown (NASDAQ:RIDE).
Rivian (NASDAQ:RIVN) has a very high valuation, but given its contract with Amazon (NASDAQ:AMZN), I think that the stock could very well have much more room to run over the next six months or a year. Similarly, Nio’s (NYSE:NIO) valuation is quite high, but the company’s huge growth, gigantic home market and overseas expansion could still enable its stock to climb meaningfully over the longer term.
Finally, there are multiple EV stocks that are tremendously undervalued. These names could easily triple in the next year.
In addition to making money from selling EVs, the automakers in this category can generate revenue and profits from software subscriptions, including charging extra for automated driving assistance systems.
EV Stocks to Buy: Arrival (ARVL)
Arrival has huge deals with two gigantic companies: UPS (NYSE:UPS) and Uber (NYSE:UBER). Of course, UPS is one of the biggest package deliverers in the world, benefiting a great deal from the e-commerce revolution, while Uber is one of the largest ridesharing companies globally.
What’s more, Anaheim, Calif. has agreed to buy $2 million of buses from Arrival, and the bipartisan infrastructure law has appropriated up to $5 billion for zero-emission buses, leaving Arrival well-positioned to sell many more of its electric buses to municipalities.
Also importantly, the number of EVs ordered from Arrival has jumped to 64,000, while the company has said that it can manufacture EVs for similar average selling prices as conventional, internal combustion engine vehicles.
ARVL stock plunged on Nov. 9 because the company said that it expects only “modest” EV production this year. It had previously predicted that its 2022 revenue would be $1 billion. ARVL stock sank on Nov. 17 after announcing that it would sell 25 million shares of stock and issue $200 million of convertible notes.
I think the news, especially the revised guidance, led many to conclude that Arrival could be a problematic EV maker along the lines of Workhorse and Lordstown.
Given Arrival’s partnerships with UPS and Uber, along with UPS’ very enthusiastic statements about Arrival and the deal with Anaheim, I believe that the EV maker is actually poised to be one of the most successful EV makers.
Yet ARVL stock currently has a market capitalization of just $4.5 billion.
The Chinese EV maker has delivered tremendous growth and its EVs have gotten great reviews for the most part. Taken together, that suggests that the company has developed very high-quality vehicles.
For October, the Chinese EV maker’s deliveries soared 233% year-over-year to over 10,000 EVs. For the first ten months of 2021, its deliveries surged nearly 300% YOY to over 66,000 vehicles.
On Nov. 18, the company introduced its new G9 flagship smart SUV. The EV includes Xpeng’s XPILOT 4.0 advanced driver assistance system.
According to the automaker, the system “will be the first to deliver full-scenario assisted smart driving from vehicle start-up to parking.”
The company says the G9 is made for both Chinese and international markets. It’s slated to be launched in China in Q3 of 2022.
Speaking of international markets, Xpeng has officially made a long-awaited foray into Europe. Specifically, the company has begun shipping its G3 SUVs and P7 sedans to Norway, TechCrunch recently reported.
Norway is a small country but has become a leading EV market on the continent. Xpeng, however, intends to enter other European markets, the company told TechCrunch.
XPEV stock has a market capitalization of over $35 billion. Yet given its success in China, its rapid growth, the good reviews its EVs have gotten, its strong ADAS system and its entrance into Europe, the stock has a great deal of room to run.
The EV maker only delivered 21 EVs in Q3, but it had produced 182 vehicles from August 2020 to early November 2021.
Much more importantly, there are numerous signs that there is strong demand for Electramecchanica’s EVs.
“We are more focused than ever on ramping production to meet the significant demand for our flagship SOLO EV,” said CEO Kevin Pavlov in the company’s earnings press release
What’s more, Pavlov said that the company still intends to open a plant that will be able to produce up to 20,000 vehicles annually. It’s difficult to believe that the automaker would spend a great deal of money on developing such a sizeable plant unless there was a large amount of demand for the Solo.
In another superb sign for Electramecchanica, the company’s manufacturing partner, China’s Zongshen Industrial Group, exercised 1.4 million warrants at a CAD$4.00 strike price, as of Oct.28, generating CAD$5.6 million in proceeds for Electramecchanica.
I agree with Electramecchanica that the exercise of the warrants by Zongshen does indeed show confidence in Electramecchanica and its shares.
As I’ve written in the past, I believe that Electramecchanica’s Solo is very well-suited not only for food delivery but for work-from-home consumers as well. SOLO stock has a market capitalization of less than $300 million, which is quite cheap for an EV maker.
EV Stocks to Buy: EVgo (EVGO)
According to a March 2021 presentation by EVgo, the company owns the largest U.S. Public DC Fast charging Network, with roughly 1,400 DC Fast Chargers and 800+ Dc Fast Charging sites.
Under EVgo’s initial partnership with General Motors (NYSE:GM), the company is expected to add another 2,750 DC fast chargers. With a recent upgrade of the deal, the companies agreed to increase the total by 500, bringing its chargers to 52 regions in the U.S., up from 40 under the initial agreement.
Like Arrival, EVgo has a deal with Uber. Under the companies’ agreement, which was also recently expanded, Uber’s drivers can use EVgo’s chargers.
Meanwhile, the infrastructure law allocated $7.5 billion to public chargers, meaning that new chargers built by EVgo could be subsidized by the federal government.
On the date of publication, Larry Ramer held long positions in Arrival, Electramecchanica, .EVgo, and Xpeng.
Larry Ramer 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. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been GE, solar stocks, and Snap. You can reach him on StockTwits at @larryramer.