Electric vehicle sales are expected to hit an all-time high this year. In fact, according to Inside Climate News, EV adoption is accelerating quicker than expected. Government subsidies and mandates in the U.S., China and Europe are already helping. All of which could fuel further upside for undervalued EV stocks.
China, for example, already hit its 2025 targets earlier than expected. Around 37% of all new cars sold in that country were electric, according to analysts at Raymond James. This year, that number could climb to 45%, according to the International Energy Agency.
“Falling battery costs, increased policy support and shifting consumer attitudes could mean that electric vehicles will account for more than 60% of new vehicle sales globally by 2030,” added the Rocky Mountain Institute (RMI).
Other key catalysts include the eventual and hopeful buildout of electric vehicle charging infrastructure and lower interest rates from the Federal Reserve. Plus, with a good deal of fear now priced into some of the most undervalued EV stocks, it’s time to buy.
Albemarle (ALB)
After dropping to triple-bottom support dating back to early February, Albemarle (NYSE:ALB) is slowly climbing back. Last trading at $130.05, I’d like to see it retest $142 near term.
Helping, ALB also just declared a 40-cent dividend, which is payable on July 1 to shareholders of record as of June 14.
Even better, lithium prices are showing signs of bottoming out. As I noted on May 2, “Analysts at Fastmarkets say demand for lithium in the U.S. could grow by 487% to 412,000 tonnes by the time 2030 rolls around. Should that happen, a shortage of supply coupled with explosive demand will lead to another massive spike in lithium.”
While earnings were nothing to write home about, that’s to be expected when lithium prices collapse 80% on oversupply issues.
In its most recent quarter, ALB posted earnings per share of 26 cents, which beat by three cents. Revenue of $1.36 billion, while down 47.3% year over year was in-line with estimates. If lithium prices are truly bottoming out, ALB earnings should improve along with it.
Nio (NIO)
Even Nio (NYSE:NIO) is showing big signs of life again thanks to Chinese subsidies. It’s also another one of the most undervalued EV stocks to consider.
Since bottoming out at $3.61 on April 22, it hit a recent high of $6. Now at $5.22, it’s still a strong buy opportunity, as sales accelerate. For example, in April, the company saw 134.6% year-over-year delivery growth. Year to date, Nio has now delivered 45,673 vehicles, a 21.2% jump year over year, as well.
It also launched its newest 2024 ET7, a premium smart electric sedan. Plus, Nio says it’s on track to make two new models for the European EV market. As noted by Reuters, “The Chinese EV company is on track to unveil a new mass-market brand by the end of May and a second smaller EV under $30K for the European market by 2025.”
Helping. China said it has plans to provide auto owners with incentives to buy EVs, as noted by MarketWatch.com. “China plans to pay car owners up to 10,000 yuan, or nearly $1,400 at current exchange rates, if they replace their cars with electric or hybrid vehicles through the end of this year, according to a report in The Wall Street Journal.”
Global X Lithium ETF (LIT)
We can also look at exchange-traded funds (ETF) like the Global X Lithium ETF (NYSEARCA:LIT).
While it has run into strong overhead resistance at around $47.25, I’d like to see the ETF retest $52.50 near term. In fact, that could easily happen if EV sales gain momentum, and if lithium prices have finally bottomed out.
With an expense ratio of 0.75%, the ETF invests in the complete lithium cycle. That includes mining and refining the metal through battery production. Some of its 40 holdings include Albemarle, Pilbara Minerals (OTCMKTS:PILBF), Tesla (NASDAQ:TSLA), BYD Co. (OTCMKTS:BYDDF), Arcadium Lithium (NYSE:ALTM), and Pansonic (OTCMKTS:PCRHY).
We also have to consider that should we see a stronger green energy boom and a global recovery in electric vehicle sales, lithium prices should explode even higher. Plus, as noted by the United Nations Conference on Trade and Development, lithium demand is “on track” to outpace production through 2050.
All of which could send lithium prices through the roof.
On the date of publication, Ian Cooper did not hold (either directly or indirectly) any positions in the securities mentioned. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
