The electric vehicle (EV) revolution is in full swing and the critical component driving it forward is batteries – and battery stocks.
The market for the batteries that power EVs is red-hot as the switch from gasoline-powered vehicles surges ahead. According to Markets and Research, the EV battery market is expected to reach $175.11 billion by 2028 for a compound annual growth rate (CAGR) of 26%.
And as automakers from Ford (NYSE:F) to Tesla (NASDAQ:TSLA) ramp up their EV production and introduce new models of fully electric cars, trucks and SUVs, the demand for batteries is only expected to intensify.
The good news for investors is that the current market downturn has made many electric vehicle stocks down right cheap to buy. Here are three of the best battery stocks to charge up your portfolio.
Best Battery Stocks: ChargePoint (CHPT)
CHPT stock shot up 10% on the day that JPMorgan made the upgrade, noting in its assessment that ChargePoint has a huge growth opportunity ahead of it and that investors are overly concerned about profits in the near-term for the company that operates the biggest network of electric vehicle battery charging stations in the world.
“We think investors may be too pessimistic on ChargePoint’s expenses and path to profitability,” wrote JPMorgan analyst Bill Peterson.
The upgrade by JPMorgan was the best news that ChargePoint and its shareholders received since the company went public in March 2021 via a special purpose acquisition company (SPAC) deal. In the past six months, CHPT stock is down 41%. And that’s after the 10% jump following the positive note from JPMorgan. In the last month, ChargePoint’s stock has declined 27%.
However, given its leading market position in the U.S., aggressive expansion in Europe, and presence in 14 countries worldwide, there is still reason to be bullish on the long-term prospects for ChargePoint and its network of EV charging stations.
Charlotte, North Carolina-based Albemarle is the largest provider of lithium for electric vehicle batteries, and business is booming. The specialty chemicals company controls over half of the world’s lithium and lithium storage products, which are in high demand as established automakers and start-ups race to rollout electric vehicles and leave the combustion engine behind.
Lithium prices last year jumped nearly 500% higher as global electric vehicle sales rose 160%. And lithium production is forecast to more than triple to more than 1.1 million tons by 2025 from 300,000 tons in 2020.
Albemarle is taking full advantage of the huge demand for the lithium used in electric vehicle batteries. The company announced that it will spend $1.5 billion over the next five years on new lithium projects in Nevada, Australia and China.
As long as the company is able to continue growing and maintain its global lead, Albemarle should continue rewarding shareholders. ALB stock has been pulled down 5% year to date amid broader market volatility. However, the share price is still up 35% over the past 12 months. Expect more gains going forward.
Best Battery Stocks: Nio (NIO)
Shanghai, China-based Nio does not just make electric vehicles. It also makes the batteries that go into its cars and has pioneered a “battery as a service” (BaaS) model that is proving to be very popular in the Asian nation of 1.4 billion people.
The model sees owners of Nio vehicles pull into designated service stations to switch out their drained batteries for freshly charged ones, in the same way that consumers swap their empty barbecue propane tanks for filled ones at Costco (NASDAQ:COST). The service saves Nio customers from having to buy and install expensive battery charging systems in their homes. And the monthly subscription model provides Nio with a steady income stream.
Nio is now taking its BaaS model to Europe, where it recently expanded. And while Nio stock has been badly beaten down over the past year, many analysts say the shares are a buy now that they recently traded at a 52-week low of just over $20 a share. NIO stock is down 22% year-to-date and has declined an eye-watering 57% in the past 12 months. However, the median price target on the company’s shares among 25 Wall Street analysts who cover the company is $58.22.
Based on the price targets, the view is clearly that the sell-off in Nio stock has been overdone.
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.