Last year was a nightmare for growth stocks. It goes without saying that even EV stocks were not spared. The best of EV stocks witnessed a deep correction. However, the electric vehicle market is still at an early growth stage. With tailwinds of government focus on EVs, higher gas prices, and geopolitical tensions, stocks have made a strong comeback in 2023.
I further believe that EV stocks will remain in an uptrend. It’s also worth noting that the markets are now clearly differentiating between leaders and laggards in the EV sector. For year-to-date, some EV stocks have skyrocketed while others have continued to decline.
In my view, it’s better to average up on fundamentally strong stocks. This column focuses on three EV stocks to buy and hold for long-term value creation. Let’s discuss the reasons to be bullish on these names even after a strong rally in the last few quarters.
Tesla (TSLA)
Tesla (NASDAQ:TSLA) stock has made a strong comeback in 2023 after a deep correction in the prior year. I believe that the positive momentum will be sustained on the back of positive industry tailwinds, strong fundamentals, and aggressive expansion.
It’s worth noting that Tesla already has six Gigafactories. However, with the company targeting annual EV production of 20 million by 2030, more production sites are on the cards. The potential locations include Southeast Asia, India, and Mexico.
Besides production expansion, Tesla has a strong line-up of models. This includes Cybertruck, Roadster, and Tesla Semi. Additionally, the company’s supercharger business is likely to be worth $10 to $20 billion by 2030.
Therefore, there are multiple catalysts for growth and Tesla has already been reporting robust cash flows. I don’t see any concerns related to financing aggressive global expansion and investment in research and development.
Li Auto (LI)
Li Auto (NASDAQ:LI) stock has been flying higher with returns of 90% for year-to-date. The big rally has been backed by strong fundamental developments and I expect LI stock to remain in an uptrend.
It’s worth noting that Li Auto is on a high-growth trajectory when it comes to deliveries and revenue growth. Stellar growth has been backed by the launch of new models coupled with aggressive retail expansion within China.
To put things into perspective, Li Auto reported revenue of $3.86 billion for Q2 2023, which was higher by 229.7% on a year-on-year basis. For the same period, the company reported a vehicle margin of 21% and a free cash flow of $1.33 billion. With a total cash buffer of $10.17 billion, the company has high financial flexibility for investment in expansion and product innovation.
I must add that for August, Li Auto reported delivery of 34,914 vehicles, which was higher by 663.8% on a year-on-year basis. Clearly, the growth momentum has sustained beyond Q2, and as Li continues to report healthy numbers, the stock will trend higher.
BYD Company (BYDDF)
BYD Company (OTCMKTS:BYDDF) stock has trended higher by 15% in the last 12 months. However, considering the company’s growth, the stock looks attractive at a forward price-earnings ratio of 27.6.
In recent news, BYD Company has entered into an agreement with US-based manufacturer Jabil Inc. to buy its mobility business in China. This is likely to help BYD expand into electric components. It’s worth noting that Jabil manufacturers printed circuit boards, which were applied across industries, including EVs and smartphones.
In terms of growth, BYD reported Q2 profits increasing by 65% on a quarter-on-quarter basis to $936 million. With the EV business performing and with diversification, BYD is positioned for sustained growth. It’s worth mentioning here that the company is expanding its automobile business with the introduction of double-decker electric buses in Chile for public transport.
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.
