The future of electric vehicles is becoming more certain. However, EVs still make up less than 10% of all vehicles sold in the United States. While EV adoption is not happening as fast as many investors would like, it does offer the opportunity to build a position in the companies that supply the EV industry. That includes looking for undervalued battery stocks to buy.
Lithium-ion batteries are still the industry standard and will remain that way for some time. That means investors are focusing on lithium miners and companies that produce lithium-ion batteries. However, there are other ways to play this sector. There are companies investing in solid-state batteries and only time will tell what other innovations are to come in this space.
This article highlights three undervalued battery stocks to buy as you consider how to build a position in this still-emerging sector.
Panasonic Holdings (PCRFY)
A stock that’s up more than 40% in 2023 may seem like an odd choice as one of the undervalued battery stocks to buy. But that’s the case with Panasonic Holdings (OTCMKTS:PCRFY). However, with a forward price-to-earnings (P/E) ratio of just 11x, there could be more upside for PCRFY stock.
Panasonic is one of the leading suppliers of lithium-ion batteries that are, for now, the standard for electric vehicles. The company is a major supplier for Tesla (NASDAQ:TSLA), and it has made no secret of its plans to massively expand its production by 2031. Panasonic is also working to improve the density of its batteries by 2030.
Of the 18 analysts that have offered ratings on PCRFY stock, 12 give it a Buy rating. The company is also projecting earnings growth of $4.00 in the next 12 months.
To begin with, Albemarle is one of the largest lithium companies by market capitalization even though it does more than just mine for lithium. The company also has mining operations on multiple continents, and notably, it is making a push to increase its mining operations in the United States. All of this fits the company’s internal estimates for a 5x growth in lithium demand between now and 2030.
But investing in companies tied to commodities carries risk and that is reflected in the ALB stock price. It’s down 14.95% in 2023 and 3.78% in just the last month. The stock has found support above its May lows, but there’s still an opportunity for investors.
QuantumScape (NYSE:QS) carries the most risk of any company on this list of undervalued battery stocks to buy. The company is developing a solid-state battery solution that, if successful, could challenge the current lithium-ion standard. What should investors consider before investing in QS stock?
On the positive side, the company had $900 million in liquidity at the end of its second quarter. And it has a total net cash position of $1.12 billion including $300 million raised in a debt offering in August 2023. That means the company should be capitalized through 2025. It has a partnership with Volkswagen (OTCMKTS:VWAGY) in which Volkswagen is agreeing to use the company’s solid-state batteries once they’re production-ready.
On the other hand, there is a chance that the company’s production could be delayed. There’s also the possibility that the company will struggle to be profitable even if it does begin producing batteries at scale.
Investors need to balance the risk versus reward before investing in QuantumScape. But if you believe they could be in production by 2026, now could be the time for patient investors with a long time horizon to begin building a position.
On the date of publication, Chris Markoch 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.