Besides investing in electric vehicle (EV) manufacturers, there are various other ways to benefit from secular industry tailwinds. This includes investment in battery stocks, lithium, and auto component manufacturers. This column discusses some of the best battery stocks to buy that can deliver multibagger returns in the next five years.
Given the fact that EV adoption is still at a relatively early stage, battery manufacturers have ample room for growth. For 2022, lithium-ion battery demand increased by about 65% to 550 GWh. Furthermore, the global battery industry was valued at $50.21 billion in 2021. It’s expected that the industry will grow at a CAGR of 18.9% through 2030.
Given this growth potential, the best battery stocks can create immense value. This column talks about a leading EV battery manufacturer, an emerging player in the solid-state battery space, and a lithium stock. Let’s discuss the reasons to be bullish on these names.
Panasonic Holdings (PCRFY)
Without doubt, Panasonic Holdings (OTCMKTS:PCRFY) is among the best battery stocks to buy. PCRFY stock has been in an uptrend, but I believe that fresh exposure can be considered even at current levels. My view is underscored by the point that PCRFY stock trades at an attractive forward price-to-earnings (P/E) ratio of 9.8. Additionally, the stock offers a dividend yield of 1.78%.
It’s worth noting that the company has undertaken an aggressive EV battery capacity expansion investment. The company already has a plant in Nevada and is building a second plant in Kansas. Once operational, Panasonic’s annual battery capacity will increase to 80GWh. Further, the company intends to invest in further capacity expansion to 200GWh by 2031. This will translate into healthy revenue and cash flow growth.
Besides capacity expansion, Panasonic is also working towards battery upgrades. The target is to increase battery energy density by 20% by 2030. This will ensure lighter batteries along with improved performance.
Solid Power (SLDP)
Solid Power (NASDAQ:SLDP) stock has disappointed with a sustained downtrend. I, however, believe that the selling is overdone and SLDP stock is worth accumulating. Of course, the risk is high and investors need to wait for potential commercialization of solid-state batteries in 2026. But if the progress remains on track, returns can be multi-fold.
I like the fact that Solid Power has the backing of automotive giants that include BMW (OTCMKTS:BMWYY) and Ford (NYSE:F). It’s worth noting that the company’s technology is already licensed to BMW for parallel research and development.
From a financial perspective, Solid Power reported cash and equivalents of $443 million as of Q2 2023. I don’t see any dilution concerns in the next 12 to 18 months. In terms of stock upside catalyst, the company will be delivering A-sample EV cells to automotive partners for validation testing. Positive results on this front can trigger a big rally.
Albemarle (ALB)
Global demand for lithium will continue to increase considering the rising adoption of EVs. It’s expected that by 2035, the lithium supply gap will be 1.1 million tonnes. I will therefore include a lithium player among the best battery stocks to buy. Albemarle Corporation (NYSE:ALB) is an attractive bet with the stock trading at a forward P/E ratio of 6.5.
It’s worth noting that Albemarle is on a robust growth trajectory. For 2023, the company expects revenue growth in the range of 40% to 55%. Growth is likely to remain healthy through 2027.
To put things into perspective, Albemarle has guided for annual lithium sales volume growth of 20% to 30% through this period. Once lithium trends higher, EBITDA margin and free cash flows will be strong. Albemarle is among the attractive dividend growth stocks to consider if we look at the free cash flow visibility.
On the date of publication, Faisal Humayun 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.
