- Electric vehicle stocks could be reaching an inflection following the recent sell-off.
- Nio (NIO): Solid fundamentals and stock is oversold.
- XPeng (XPEV): A consistent performer trading at a discount.
- Fisker (FSR): On the cusp of breaking into the commercial league.
- Li Auto (LI): Well positioned to capitalize on heavy investment in EVs and EV technology.
- Rivian (RIVN): Sorting out of execution issues removes an overhang.
- Workhorse (WKHS): A turnaround story in the making.
- Arrival (ARVL): Follows a novel manufacturing approach that could make its products cost competitive.
Electric vehicle (EV) manufacturers were bracing for an extended period of expanding market opportunity. The regulatory environment was in their favor and consumers were slowly and steadily gravitating toward green energy vehicles. Reflecting the promising future, stocks of these companies ran up, and in the process gathered heady valuations.
But a couple of factors caught them off guard, putting their best laid-out plans into a jeopardy. The last few months have been testing times for economies, companies and consumers. A pandemic that emerged in early 2020 is still running its course. Despite the fits-and-starts recovery that is in place following the Covid-19-induced downturn, inflationary pressure has intensified globally. EV manufacturers face the double whammy of production constraints and demand destruction.
It’s no brainer that electric vehicle stocks pulled back along with the flailing fortunes of these companies. The X Autonomous & Electric Vehicles ETF (NASDAQ:DRIV) has pulled back about 28% since it hit a record high of $32.37 in late November. As EV makers acclimatize themselves to the evolving scenario and take remedial actions, it’s time to revisit some of the electric vehicle stocks that have the strong backing of analysts.
Most analysts are seen working on a particular sector or stock for years together, which sharpens their expertise in making accurate predictions. At times, analysts may have privy to information that is not readily available to the public.
With this in mind, I screened out these seven electric vehicle stocks using these three parameters:
- Covered by at least four analysts
- Analysts’ ratings of “buy” or higher, with no selling rating
- Average analysts’ price target suggesting over 50% upside from current levels
So let’s dig into these electric vehicle stocks:
I have long been puzzled by the abject misery of high-end EV seller Nio’s (NYSE:NIO) stock. Ever since topping out at $66.99 on Jan. 11, 2021, the first session after the company’s hugely successful Nio Day 2020, it has been on a broader free fall. The stock is now trading at $16 and a change.
Granted it reported production disruptions in October 2021 but that was to prepare its manufacturing line to accommodate production of new models. Much of the other pushbacks are either industry-wide or market-wide. The kind of sell-off seen in the stock would make anyone wonder why it has been singled out for such a severe punishment.
The company has a credible plan to move forward. It is expanding its product lineup to possibly at least six. This will likely take care of volume growth. A recent report suggesting that the Chinese government is contemplating extension of EV subsidies should bode well for Nio.. And its international expansion is an optionality for investors.
XPeng (NYSE:XPEV) remained off the radar for long before moving out of the shadows of its bigger rival Nio. All through 2021, the company continued to outdo both itself and its U.S.-listed Chinese peers. The company delivered 98,155 vehicles in 2021, up over 250% from the previous year. This exceeded the 91,429 vehicles Nio sold for the year.
How did this nimble startup rise up in ranks? The company was proactive in its approach and strategies. In a bid to tap into the pent-up demand post the Covid-19 pandemic, the company unveiled a competitively priced family sedan, named P5, in 2021.
XPeng also worked diligently to finetune its autonomous driver assistance system (ADAS) technology, called NGP. Additionally, the company has charted out an aggressive overseas expansion strategy that opens up additional markets for its vehicles.
The stock weakness presents an attractive entry point into this consistent performer.
Next on our list of electric vehicle stocks beloved by analysts is Fisker (NASDAQ:FSR). The company is inching closer to commercialization, with the production of its Ocean SUV set to start on November 17. The company confirmed in its first-quarter earnings release that it continued to make rapid progress, moving from simulated to physical testing and validation across multiple workstreams.
Demand for the first EV from the company’s stable is robust. As of May 2, 2022, reservations stood at 45,000, including 1,600 fleet reservations. The company also confirmed that it will open pre-orders for the limited-edition Fisker Ocean on July 1.
Fisker recently announced that the production of the PEAR budget EV it is co-developing with Hon Hai Precision (OTCMKTS:HNHPF) will begin in 2024. The EV is said to have an expected base price below $29,900. The two companies plan to build a minimum of 250,000 PEAR vehicles per year once the new Ohio manufacturing facility they acquired begins to ramp up.
If Fisker can execute on plans, we have a winner in the making.
Li Auto (LI)
Li Auto (NASDAQ:LI), along with Nio, XPeng and other Chinese peers, are beneficiaries of the massive potential China offers for EV makers. EV sales in China soared nearly 170% to 2.99 million units in 2021, making up almost half of the EVs sold globally.
EV penetration rate rose to a record high of 28.2% in March 2022, data from industry body China Passenger Car Association showed. This metric, referring to the number of new energy vehicles as a proportion of new vehicle sales, is expected to increase further in the country. As I said earlier, the extension of China’s EV subsidies will serve as a facilitating factor.
Li Auto is well positioned to capitalize on this positive development. The company is planning to launch its second production model, named L9, in the third quarter. The L9 will be its flagship family SUV developed on its new EREV platform. Additionally, the company is planning huge R&D spend with the goal of “building an end-to-end BEV and charging ecosystem that can support a driving range of more than 400 kilometers with only 10 minutes charging.”
A leader in the EV pickup truck space, Rivian (NASDAQ:RIVN) was expected to leverage on the first-mover advantage. However, the company was rocked by execution issues. In March, the company substantially lowered its production estimate for 2022.
The stock recently came under significant weakness amid selling by insiders, including Ford (NYSE:F) following lockup expiration.
On a positive note, Rivian assured investors by reaffirming its production guidance in its first-quarter earnings report released in early May. As of May 9, R1 net preorders in the U.S. and Canada totaled over 90,000 and the company has an initial order for 100,000 electric delivery van from Amazon (NASDAQ:AMZN). Rivian sounded upbeat on the way forward:
To ensure continued product leadership as well as long-term structural cost advantages, we have taken the decision to vertically integrate in a number of key areas, including our electronics, software stack, propulsion, and battery systems.
It might be redemption time for scandal-tainted and beleaguered EV maker Workhorse (NASDAQ:WKHS). The company in the past had to navigate through allegations of faking orders, hiding a Securities and Exchange Commission (SEC) investigation from investors and committing accounting fraud. It also faced production issues after it was forced to halt deliveries of its C-1000 EV delivery van and recall the already delivered 41 vans, citing safety issues.
Additionally, the company was in a legal tangle over United Postal Service (USPS) issuing a $6 million mail truck deal to Oshkosh (NYSE:OSK).
All these negative developments are in rear view of Workhorse now. Apart from reviving its C-1000 vans, the company also plans to start production of three more delivery trucks between now and 2024. Earlier this month, the company announced an order win from fleet management company Amerit Fleet Solutions, for the supply of 10 BEVs.
CEO Rick Dauch is optimistic of a turnaround. He said in a statement in the earnings release:
We are making progress on our strategic priorities, including moving forward with our revised product portfolio roadmap,” said the Workhorse CEO.
Last on our list of electric vehicle stocks is U.K.-based commercial EV manufacturer Arrival (NASDAQ:ARVL). The company follows a unique new design and production method of using microfactories to manufacture affordable EVs. As opposed to the traditional assembly-line manufacturing of vehicles, Arrival subscribes to the theory of decentralization, which is the concept behind its microfactories.
Arrival’s zero-emission bus has achieved European Union certification that would allow it to be driven on public roads with passengers. The company plans public road trials in the third quarter.
Arrival is also in the process of completing the final prototype van build. Over 70% certification tests are already completed. Production start time is planned, both in the U.K. and U.S., later this year. To its credit, the company has an order from United Parcel Service (NYSE:UPS) for 10,000 delivery vans.
On the date of publication, Shanthi Rexaline 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.