The EV market is one of the hottest topics amongst investors. Given the growing attention to carbon emissions and more eco-friendly technology, EVs are more popular than ever. The growth of EV stocks has slowed this year, but still continues to grow.
Many EV makers have felt the repercussions of the EV market’s volatility. While some have shown remarkable resilience, newer companies that have not reached their full potential and profitability pose risks for investors. However, these three stocks have proven to withstand this volatility better than others and are in excellent positions to show continued success.
We’ll cover the characteristics of these stocks and future developments that make them attractive to investors looking to profit this year.
ON Semiconductor Corp. (ON)
The EV titan ON Semiconductor Corp. (NASDAQ:ON) is an excellent alternative for investors looking to buy EV stocks, but it limits the risk of volatility accompanying many EV producers/manufacturers. This company produces chips required to make EVs and has also branched into Advanced Driver Assistance Systems (ADAS) to diversify its offerings.
ON Semi has performed amazingly over the last few years. Like many other EV stocks, ON saw a big jump in 2022 and carried that momentum into 2023. However, the slowing demand for EVs has taken its toll since late last year. While this turned some investors away, ON Semi surprised many with a solid Q4 earnings report.
Revenue and EPS were in the upper range of the company’s guidance for the quarter. While certainly not the most impressive showing, the stock remained stable, with many others declining. ON Semi also spent $564 million to repurchase shares and stabilize its stock price.
This stability and consistency make ON Semi a great buy. EV demand will always reflect a considerable jump in this stock, yet it has proven its resiliency to dips.
Rivian Automotive (RIVN)
Rivian Automotive (NASDAQ:RIVN) is an EV stock that has excited many. Last quarter, it outperformed popular models from big names like Tesla and Ford in sales. While the stock is not profitable and remains far below its peak, it has enormous sales and revenue growth potential.
Rivian’s current growth reflects the marketwide slowdown in EV sales, but its growth potential is undeniable. Estimates predict an over 50% growth rate in sales in 2025 and a shrinking operating loss.
This enormous growth is expected to be fueled by Rivian’s soon-to-be-released R2 vehicles. The R2 model is Rivian’s answer to demand for more affordable, mainstream EVs. Rivian already planned to release its R2 model by 2026, but after competitors like Ford saw an incredible influx of sales following its price reduction, Rivian moved up its timeline.
Rivian adjusted its production plans for its Georgia plant and continued making its R2 model in its original Illinois plant. This will not only speed up the schedule but also save Rivian a whopping $2.25 billion, which will significantly cut its operating costs.
With Rivian on track now, the operating cost cut and huge projected profits from its release of the R2 in 2026 could mean a massive jump in its stock.
Li Auto (LI)
Li Auto (NASDAQ:LI) has had standout results, setting it apart from other EV producers in China. The stock has shown impressive revenue growth over the last few years but remains at a relatively cheap price-to-sales ratio of 1.92 compared to competitors.
Li Auto has been viewed as a volatile, risky stock. Despite its optimistic estimates, it had to decrease its delivery estimate in Q1 of 2024. Li Auto expected a boom in demand for its first fully electric model, the mega SUV, released last month.
The company’s early success came from not fully electric vehicles, so it is reasonable to imagine the company’s regular consumers had less reason to jump at the new model. Li Auto is not the only EV company with lower-than-average sales, but it has had one of the best resiliencies in a slow Chinese economy and EV market.
Despite its current performance, it is extremely unlikely that demand for EVs will die out, and Li Auto, with its new mega SUV and proven history, will be an excellent pick in the long run.
On the date of publication, Joel Lim 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.
