A company’s popularity among investors is a key attribute required for its stock to attain relatively high valuations and outperform peers. This phenomenon is more important in new industries, and the electric vehicle (EV) manufacturing industry is one such area where little-known EV stocks could outperform popular peers once they achieve a surprise target that catapults them into the general public’s eye.
The most popular EV giant Tesla (NASDAQ:TSLA) stock has for a long time attained valuation multiples that boggled fundamentals-driven analysts. The company’s founder Elon Musk commands an international social media following that could make cult leaders envious. Tesla stock attracts over 5,000,000 average monthly searches on the web, and the company had 32 Wall Street analysts issue earnings projections for 2022.
A similar popularity profile applies to Chinese EV play NIO (NYSE:NIO). Nio stock attracts about 3.4 million unique Google searches a month. A total of 25 investment banking analysts provided revenue and earnings projects for NIO’s 2022 financials.
What’s key is that popularity among investors and analysts unlocks stretched valuation multiples when the company’s story is appealing. Rivian Automotive (NASDAQ:RIVN) and the Lucid Group (NASDAQ:LCID) are the other popular EV stocks that have attracted stretched valuations.
In one investing strategy, investors look for lesser-known stocks with the potential to positively surprise the market. Such stocks could violently surge as new investors pile into them. They do need to have a catalyst that could ignite increased interest. A rapid increase in analyst coverage or search engine traffic are among several such catalysts.
Below is my list of three lesser-known electric vehicle stocks that may surprise everyone in the EV race.
Let’s take a closer look.
Lesser-Known EV Stock: Solid Power (SLDP)
An electric vehicle’s battery pack can comprise up to 30% of an EV’s total cost to a customer. There is an ongoing race to engineer the next generation lithium battery pack that solves all the EV industry’s current lithium battery issues, and investors are most familiar with a $7.2 billion valued QuantumScape Corporation (NYSE:QS) stock, a pre-revenue stage developer of high power density solid-state batteries.
Among the lesser-known solid-state electric-vehicle battery stocks that could take the industry by surprise in the race to build a better battery is Solid Power.
While QuantumScape stock attracts 450,000 monthly searches on the web, and the attention of seven investment banking analysts, Solid Power had only two Wall Street analysts provide forecasts for 2022, and SLDP stock is searched just 9,900 times a month on the internet.
Solid Power has spent 10 years researching on and developing a solid-state lithium battery that uses solid sulfide electrolytes to replace the fire-prone gel used in current technology. It targets to offer a 15% – 35% cost advantage over traditional lithium-ion battery pack, 80% more driving range and nearly twice the lifespan of a battery, and faster charging rates, all the while doing away with the flammable liquid gel.
Interestingly, Solid Power has the backing of Ford Mortar Company (NYSE:F), the BMW Group (OTCMKTS:BMWYY) and a partnership with Korean battery manufacturing giant SK Innovation. It has hit some critical development milestones already and could be internally producing 100 Ah Silicon EV battery cells by the end of this year for pilot testing in cars.
Solid Power plans to sell its sulfides at very good margins to the whole battery manufacturing industry once large-scale production starts around 2026. The company’s capital-light strategy will rely on outsourced battery manufacturing.
Could the small company with a $1.5 billion market capitalization change the global electric vehicle market? A pilot project under construction this year will provide better answers, and potentially surprise everyone as the race to develop the best electric vehicle battery unfolds.
Arrival (ARVL)
Luxemburg-based Arrival is a commercial vehicle manufacturer that plans to start manufacturing electric delivery vans and EV buses this year. The company has a unique strategy for its EV production – it will build its electric vehicles in capital-light micro-factories constructed closer to its target markets.
Arrival is one of the lesser-known electric vehicle stocks with only four Wall Street analysts covering ARVL stock today. Moreover, Arrival stock attracts a mere 590 average web searches a month. Yet short interest has increased to over 25% of available float.
The investing public has yet to get interested in ARVL stock’s potential to generate life-changing investment returns. But that could change.
Arrival’s electric bus is undergoing public road trials with First Bus in the United Kingdom. If successful, the company could break into the Local Authorities market of England and have up to 193 of its new electric buses incorporated into their fleet. This could be the beginning of a long-term customer relationship.
The company expects to sell and deliver about 400 – 600 commercial vans this year. The United Parcel Service (NYSE:UPS) is among the first customers to receive van deliveries. Arrival expects to quickly ramp up production to thousands of vans per year from just two small micro-factories.
What’s more, Arrival’s micro-factories design reduces capital requirements, allows for high flexibility, and boosts margins. All while positioning the company as a competitive OEM that lowers the total cost of ownership of commercial EVs for customers.
The company also produces components in-house too. Management claimed that non-binding orders doubled during the last quarter of 2021 to around 134,000 vehicles.
Arrival might just change the way EV makers must design their business models to generate quick and high returns while deploying the least capital.
Arrival’s founder Denis Sverdlov is a Russian national and his firm, Kinetik SARL, owns about 72.8% of ARVL’s stock. “I’m strongly against war or discrimination of any kind,” Denis said during the company’s earnings call on March 2, 2022. The company has not been affected by any international sanctions.
Lesser-Known Electric Vehicle Stocks: Tritium (DCFC)
Investors considering buying into electric vehicle charging infrastructure probably think about ChargePoint Holdings (NYSE:CHPT) or a more popular EVgo (NASDAQ:EVGO) stock. The two electric vehicle charging plays command significant analyst attention and the investing public frequently looks up their stock tickers.
However, there’s another EV infrastructure player that currently barely registers on most investor’s radars: Tritium. The company is a global developer and manufacturer of direct current (DC) fast chargers for electric vehicles. It recently went public in January this year and has four financial analysts covering its business. DCFC stock attracts about 480 Google search queries a month and this makes it a lesser-known electric vehicle play.
Tritium boasts of over nine years of DC fast-charging experience and has become a preferred supplier of charging equipment to EV charging networks globally. The company has a proven track record of manufacturing reliable charging equipment. So there’s a low business risk here.
DCFC has sold over 6,700 DC fast chargers with a capacity above 50 kilowatts so far and has already closed sales in 41 countries.
Tritium has the potential to significantly increase its annual production and sales rate as the EV race accelerates globally. The company is one of the best-placed beneficiaries of the $7.5 billion investment in EV charging allocation from the 2022 Infrastructure Investments and Jobs Act.
The future looks brighter for DCFC stock, yet shares trade well below the pre-SPAC merger price of $10 a share and far below February highs near $20 a share printed when the company won a contract to supply chargers to Wise Power’s subsidiary Wise EV in February 2022.
Wise EV is launching a new nationwide charging network. Many more players could come into the EV charging market. Thus, Tritium stands to benefit as its addressable market expands.
The company will be a charger supplier to anyone joining the global EV charging network race — and will earn recurring service and maintenance fees, sell spares, and ultimately earn decommissioning fees every 10 years as the charger reaches its end of life.
On the date of publication, Brian Paradza did not hold (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.
