The electric vehicle (EV) industry is quite exciting. The companies involved are aiming to radically transform the technology we use as a mode of transport by making it much more sustainable. We are of course in the midst of a massive climate crisis and these companies are taking the steps needed to prevent further damage to our planet. Given that practically all of us will be driving an EV soon, the companies paving the way will have a huge headstart and control of the market when EVs become the only cars in the future. For investors looking to capitalize on this trend, there are several EV stocks to buy that will have plenty of demand when the time comes.
However, the market isn’t doing too well with EVs not offering the range of miles that gas cars do. Many EVs are just too expensive. These factors are sure to change as the technology improves, so buying the stocks now when prices are low may be wise. Consider these three EV stocks to buy, poised to rebound and soar over the long term.
Nio (NIO)
Nio (NASDAQ:NIO) is a Chinese EV manufacturer that is well-known for its Battery as a Service offering. The stock is down over 39% in the past year which gives plenty of upside for investors. In fact, analysts have an average one-year price target of $6.69, which is well above the current price of only $4.80.
In order to keep up in the competitive EV market, Nio recently announced a new affordable SUV model to appeal to a broader consumer base. This new model, the L60 SUV, is priced at only $30,465. This affordable pricing should push Nio’s delivery numbers and thus revenue going forward.
Looking at its valuation numbers, the stock has an EV/Sales ratio of only 1.18x, compared to the sector median of 1.28x and the stock’s own five-year average of 9.32x. Thus, when compared to its competitors and what the stock has usually traded for, it is sitting at a bit of a bargain right now.
XPeng (XPEV)
XPeng (NYSE:XPEV) is a small Chinese-based EV company that offers a high-upside growth opportunity for investors with a similarly high-risk appetite. The uncertainty and volatility around XPEV are reflected by its one-year price target, which ranges from a low of $7.84, all the way up to $28.52, as compared to its current price of $8.10.
XPeng’s models have found a more differentiated niche through a product lineup that has a stronger focus on connectivity and smart applications. This has been reflected by its commitment to self-driving technology that rivals Tesla (NASDAQ:TSLA). Its most recent rollout has been its XPeng Navigation Guided Pilot ADAS, which is bound to increase its already 80% urban user penetration.
Valuation-wise, the overall cyclical downturn has brought many EV companies such as XPeng to depressed metrics. However, when compared to the sector median of 10.44x, XPeng’s 7.19x EV/EBITDA stands out as a discounted opportunity for an investor. With international expansion goals already set in Hong Kong and Macau, XPeng remains a cheap contender to previous EV heavyweights that all investors should keep on their radar.
Li Auto (LI)
Li Auto (NASDAQ:LI) is another player in the Chinese EV market that uniquely offers EVs with gas-powered extenders. This business model combats range anxiety and charging fears has resonated well with customers, as well as Wall Street analysts. They project an average one-year price target of $40.78, roughly double its current price of $19.58.
Like many other EV automobile manufacturers, LI now joined in on the tight price war with TSLA. In order to sustain its own delivery growth dynamic, LI has shifted its focus from profits toward deliveries. LI’s recently launched L6 Model is expected to gain traction and increase adoption in the EV market.
Of course, LI’s stellar financials strongly sustain this shift in strategy. LI’s 52.95% YOY increase in deliveries boosted Q1 revenues by 36.4% and margins have been at a strong 19.3%. Given that its EV/Sales valuation is sitting 50% lower than its sector median, it’s easy to say that Li Auto is one of the most overlooked growth opportunities in the EV space as the market hits a rebound.
On the date of publication, Ian Hartana and Vayun Chugh did not hold (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.
