The electric vehicle market is a jungle. Several EV stocks have been competing for the top spot as 2023 ended with a slow grind due to decreasing demands. The Biden administration is also easing up on its EV transition goals, further dampening prospects.
Still, the massive government support remains in place, and continued, albeit slower, adoption is still a strong catalyst for continued growth. Well-positioned, well-managed EV companies are still great growth candidates as the green energy transition accelerates across many industries. Investors who want to bet on EV stocks should consider these three potential picks.
Tesla (TSLA)
These days, Tesla (NASDAQ:TSLA) is almost synonymous with Elon Musk and electric vehicles. The company is well known for being one of the proponents of the viability of mass-produced electric vehicles. While TSLA is known for its EV cars, it also offers other products that fall under the energy generation and storage segments. These include Powerwall and Megapack lithium-ion battery energy storage and solar energy generation. Its latest release, the Cybertruck, has received generally positive customer responses.
Tesla’s latest financials fell short of analyst expectations. Revenue grew a scant 3% YoY, which included a lackluster 1% growth in total automotive revenues. Gross profits also took a -23% hit YoY, and gross margins decreased from 23.8% to 17.6%.
Some might wonder why I still recommend TSLA in the face of such negative numbers.
Firstly, its full-year results weren’t all bad. All segments displayed notable revenue growth: automotive went up 15%, energy generation and storage increased by 54%, and services and others grew 37%.
Secondly, Tesla remains the undisputed leader in EV stocks. Its products are considered the poster child of the EV market. Another bonus is that all these negatives are priced in, and TSLA is trading at bargain prices. Currently, analysts see a high target price of $345, which is more than 70% higher than its current trading price.
General Motors (GM)
General Motors (NYSE:GM), famous for your grandfather’s Buick, is diving into the EV market these days. The company has committed to help pave the path to an all-electric future with potential investments of up to $35 billion up to 2025. This includes plans to transform its Spring Hill, Tennessee assembly plants and Factory ZERO into a dedicated space for electric vehicle production.
Some of its EV offerings include the Chevrolet Silverado EV, Chevrolet Blazer EV and Cadillac LYRIQ, to name a few. The company has recently announced that it is hiring the world-recognized battery expert Kurt Kelly to help lead its cell battery strategies in the future.
GM’s full-year FY23 results look great. Adjusted EBITDA and operating and free cash flows all fell within guidance. Meanwhile, net income attributable to shareholders ended 4% higher than the guidance, and diluted EPS ended at $7.32, exceeding the estimates of $6.52 – $7.02. GM remains optimistic for 2024, increasing guidance across the board, with net income seen to reach $9.8 billion to $11.2 billion and diluted EPS expected to end between $8.50 – $9.50. GM’s strong history and ability to adapt to changing macroeconomic conditions make it an excellent candidate for buy-rated EV stocks.
Li Auto (LI)
Last, but not least on our list of EV stocks to own is Li Auto (NASDAQ:LI), one of the primary players in the Chinese market. LI designs and manufactures smart electric vehicles and SUV models like Li-One, Li Mega, Li 9 and more. It also offers MPVs under the Li Mega models. In addition, the company offers different types of peripherals, such as charging stalls and vehicle internet connections. LI is expected to launch its MPV Li Mega on March 1st, a part of its high-tech flagship family.
The company is set to release its latest financials on Feb. 26th. Meanwhile, its latest results boast a rather impressive collection of growing financial metrics. Vehicle deliveries increased 296.3% YoY, reaching 105,108 units. Vehicle margins improved by 10.2%, from 12% to 21.2% YoY. Lastly, gross profit soared by 546.7% to 7.64 billion Chinese Yuan, which is approximately $1.05 billion.
The company recently released its January 2024 deliveries, which reported 105.8% YoY growth, reaching 31,165 vehicles. Its foothold in the massive Chinese market puts it in an excellent position for sustained growth, making it a worthy contender for the best EV stocks.
On the date of publication, Rick Orford held long positions in TSLA. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
