The electric vehicle (EV) market has seen better days. Slower sales growth and price wars have impacted many EV stocks to buy. The Global X Autonomous & Electric Vehicles ETF (NASDAQ:DRIV), which holds around 84 EV and autonomous vehicles stocks, has fallen nearly 2% on YTD, underscoring the fact many EV stocks have struggled to perform against the general market.
Despite that, now may be a good time to invest in EV stocks that have seen their valuations plummet over the past few months. Many of these companies are trading at relatively cheap valuation multiples compared to where they were earlier last year. Although a slump may blight sales growth in the short term, electric vehicles are increasingly likely to be a part of the future of transportation.
With that said, below are three EV stocks to buy on the dip.
Tesla (TSLA)
Tesla (NASDAQ:TSLA) is undoubtedly one of the largest and most prominent players in the global EV market. However, as I pointed out before, the U.S. EV manufacturer has been struggling recently.
In 2023, to mitigate the ever-prescient EV slump, Tesla pursued a largely successful price-cut strategy the automaker began to pursue in the beginning year has increased quarterly deliveries while also placing pressure on gross margins. Tesla’s Q4 2023 financial figures also beat Wall Street’s estimates, but the company issued grim guidance for 2024.
Tesla’s shares have fallen nearly 30% since the start of the year, which has put the stock in “buy-in” territory. The EV maker’s valuation multiple has also dropped significantly over the past several months, now trading around 56.0x forward earnings. Tesla’s stock has been well-known to strongly rebound after a sharp sell-off period. Given where the EV maker’s stock has landed these days, I’m inclined to believe it could be one of the best EV stocks to buy amidst the next stock market bull run.
Rivian (RIVN)
For those who want to target a specific EV vertical, Rivian (NASDAQ:RIVN) may be just the EV stock you were looking for. Rivian delivered solid production and delivery numbers for the first three quarters of 2023. The fourth quarter, however, the EV maker experienced a dip in its premium EV deliveries. Since then, the market has certainly softened on Rivian’s shares. The EV maker’s stock price has plummeted around 55% on a year-to-date basis. I have written previously that investors should proceed with caution as they consider investing in Rivian shares, as the company’s stock was certainly overvalued, producing and delivering only a minimal number of vehicles compared to its sizable market capitalization.
However, given where the stock has fallen, Rivian probably deserves another look.
The sharp sell-off in Rivian shares could very well be an opportune buying opportunity for investors interested in the premium segment of the broader EV maker. Despite current market woes, Rivian was able to deliver strong numbers through much of last year. That is to say, as the EV market recovers, so could Rivian’s growth prospects.
Moreover, Wall Street analysts seem to be loving the stock. According to Koyfin, the EV maker has a solid “Buy” rating. If Rivian’s deliveries continue rebound at some point in 2024, the EV maker could see its share rise.
Li Auto (LI)
Li Auto (NASDAQ:LI) is a leading EV manufacturer from China and key competitor to Tesla in the world’s second largest economy. The company’s EV sales actually began to overshadow that of Tesla’s China business in late 2023. This EV maker particularly focuses on producing smart SUVs with extended-range technology. The company’s flagship model, for instance, is the Li L7, a five-seat premium SUV that can run on both electricity and gasoline and competes directly with Tesla’s Model Y.
Li Auto’s share price has also taken a beating in 2024. LI shares have fallen more than 18% since the start of the year. The company trades at the lowest valuation multiple of any EV stock on this list: at 15.8x forward earnings. Wall Street has also been optimistic about Li Auto’s prospects. In mid-March, Morgan Stanley equity research analysts increased their price target for LI from $63/share to $74/share. The average price target of Li Auto represents a 75% upside from the current share price, which could be a good reason to mull buying shares now.
While vehicle deliveries have continued to stall in 2023, this is not too dissimilar to other large EV manufacturers. Of course, when interest rates start to come down later in the year, EV sales could begin to rebound, making a bet on LI shares now worth it.
On the date of publication, Tyrik Torres 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.
