Best EV Stocks: Which Is the Better Pick?

Best EV Stocks - Best EV Stocks: Which Is the Better Pick?

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It has been a rough ride for several electric vehicle (EV) stocks this year. The shift to safer value bets from high-multiple growth stocks amid rising inflation, persistent supply chain disruptions, semiconductor chip shortages, and higher interest rates have significantly eroded the value of EV stocks. That said, the long-term growth story is intact as governments across the globe are investing in a greener future and pushing for the transition to EVs to reduce their carbon footprint.

According to estimates from analytics firm Canalys, despite component shortages, the number of EVs sold in 2021 grew by 109% to 6.5 million. It is worth noting that global EV sales accounted for 9% of all passenger car sales in 2021, reflecting the huge opportunity for further market penetration.

Given this backdrop, I used the TipRanks stock comparison tool to pit Rivian Automotive (NASDAQ:RIVN), Nio (NYSE:NIO), and XPeng (NYSE:XPEV) against each other to discuss what Wall Street pros think about these EV stocks. TipRanks’ stock comparison tool facilitates comparisons of up to 10 stocks across several sectors and parameters, including analyst consensus ratings, price targets, annual gains, and market capitalization.

RIVN Rivian Automotive $30.77
NIO Nio Inc. $16.48
XPEV XPeng Inc. $22.73

Best EV Stocks: Rivian Automotive (RIVN)

A Rivian (RIVN) sign out front of an Illinois manufacturing plant.

Source: James Yarbrough / Shutterstock.com

Aside from factors impacting the broader market, shares of American EV maker Rivian have plunged this year for several company-specific reasons. In March, the company faced a backlash from customers when it announced price hikes, including on pre-ordered vehicles, due to inflationary pressures and higher component costs. Following the cancellation of orders by several irate customers, Rivian quickly rolled back the price hikes on pre-ordered vehicles. Further, Rivian disappointed its investors last month when it cut its production guidance for 2022 by half to 25,000 vehicles citing supply chain bottlenecks.

Meanwhile, Rivian delivered 1,227 vehicles and produced 2,553 vehicles at its Illinois manufacturing facility in the first quarter (Q1) of 2022. It currently produces the R1T pickup truck and R1S SUV for the consumer market and Electric Delivery Vans for Amazon (NASDAQ:AMZN), the company’s first commercial customer and a key shareholder.

Earlier this month, Rivian stated that it is on track to meet its annual production guidance of 25,000 vehicles. While that sounds reassuring, near-term headwinds, mainly supply chain issues, could continue to hit Rivian. A Wall Street Journal report stated that Rivian’s Chief Executive Officer RJ Scaringe has cautioned about a possible shortage of EV battery supplies, a challenge that he feels might “surpass the current computer-chip shortage.”

Piper Sandler analyst Alexander Potter believes that Rivian must endure this challenging period as Tesla did in its early days. He feels that “the payoff will be worth it, because Rivian has a chance to consolidate three large segments of the auto market before Tesla releases competing products.”

Potter lowered his price target on Rivian stock to $112 from $130, but reiterated a “buy” rating on the stock. This implies 261.17% upside potential over the next 12 months.

Overall, Wall Street has a moderate buy consensus rating on RIVN based on nine buys, five holds, and one sell. The average Rivian price target of $70.77 implies 128.73% upside potential from current levels. Shares have plunged around 70% year-to-date.

Nio (NIO)

A Nio (NIO) sign and logo on a tan concrete building.

Source: Sundry Photography / Shutterstock.com

Shares of Nio and other China-based EV makers have been quite volatile over the past year due to fears of delisting from U.S. exchanges and concerns over coronavirus-induced production disruptions in China. In mid-April, Nio gradually resumed production at its Hefei facility.

Meanwhile, Nio will increase the prices of its SUV line — the ES8, ES6, and EC6 — effective May 10, to mitigate the impact of higher input costs. The company is also raising the prices for its Battery as a Service battery rental service.

While production disruptions might be a drag on Nio’s operations over the near term, the company’s future prospects continue to be lucrative as it gears up for the launch of new models and further expansion into Europe. After entering Norway in 2021, Nio is set to expand into Germany, Sweden and Denmark this year.

Nio’s Q1 ’22 deliveries increased 28.5% year-over-year to 25,768 vehicles. The premium EV maker started delivering its ET7 sedan to customers in late March.

Earlier this month, UBS analyst Paul Gong upgraded Nio to a “buy” from a “hold,” but lowered the price target to $32 from $46. Gong is optimistic that Nio’s three new EV models expected to launch this year could accelerate its sales.

Gong added, “We believe NIO’s brand equity uptrend offers a prerequisite for new models’ strong sales and the strategic potential to launch a cheaper but larger volume mass-market brand in the future.”

Overall, Nio scores a strong buy consensus rating backed by 15 buys and two holds. The average NIO price target of $43.01 suggests 160.82% upside potential from current levels. Shares have declined about 49% so far this year.  

Best EV Stocks: XPeng (XPEV)

Xpeng logo and P7 model in store XPEV stock

Source: Andy Feng / Shutterstock.com

XPeng has been growing at an attractive pace. Its focus is on the mid-to-high-end segment of China’s passenger EV market. Despite the supply chain headwinds, Q122 deliveries grew 159% to 34,561 vehicles.

XPeng continues to invest in innovation, its sales and service networks, manufacturing capabilities, and international expansion regardless of Covid-19-related headwinds in China. Xpeng is also expanding in the lucrative European market. The company commenced deliveries of its G3 SUVs in Norway in late 2020. This year, Xpeng opened its Experience Store, first in Sweden and then in the Netherlands, with plans to open two additional stores in the Netherlands later this year.

In March, XPeng started accepting reservations for its P5 smart EV sedan from customers in Denmark, the Netherlands, Norway and Sweden.

In a recent research note to investors, HSBC analyst Yuqian Ding highlighted that like Tesla, Xpeng also built its autonomous driving software in-house, unlike any other domestic manufacturer. The analyst expects the company’s “leading and differentiated smart driving experience to boost its brand equity and sales.” Ding expects Xpeng’s robust product cycle to support “rapid” growth in volumes. In line with his optimism, Ding initiated coverage of XPeng with a “buy” rating and a price target of $37.

All in all, Wall Street has a strong buy consensus rating on XPeng based on nine buys and one hold. The average Xpeng price target of $45.16 implies upside potential of 97.13% over the next 12 months. Shares have tumbled 54.5% year-to-date.

Conclusion

Despite near-term pressures, essentially due to supply chain disruptions and high inflation, the long-term sentiment for several EV stocks continues to be positive due to abundant growth prospects. Currently, Wall Street analysts are treading cautiously with regard to Rivian, while they seem to be more optimistic about Chinese EV makers Nio and XPeng.

On the date of publication, Sirisha Bhogaraju 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.

Sirisha Bhogaraju has over 15 years of experience in financial research. She has written in-depth research reports and covered companies across various sectors, with a primary focus on the consumer sector. Sirisha has a master’s degree in finance.


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