The EV Investor’s Survival Guide: 7 Stocks to Buy Now for Long-Term Riches
EV companies that will navigate the current headwinds and emerge stronger in the coming years in terms of growth and market share
Globally, the electric vehicle industry has faced multiple headwinds. These have come in the form of macroeconomic headwinds, higher interest rates, and intense industry competition. The result has been a sharp correction in EV stocks in the last few quarters. While there is some fear in the streets, I would look at EV stocks to buy for long-term.
Throughout economic history, there has been booms and busts. When the industry has multi-decade tailwinds, there are dozens of new entrants. This results in a boom, but only handpicked survive in the long term and create real value. The same holds true for EV companies. There are hundreds of EV players globally. However, in the next five years, the markets will be dominated by few players that survive through innovation.
The focus of this column is therefore on EV stocks to buy that are likely to navigate the headwinds and emerge stronger. A portfolio of these stocks is likely to have millionaire-maker potential by the end of the decade.
Tesla (TSLA)
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Tesla (NASDAQ:TSLA) has a history of proving critics wrong and I believe that it’s likely to be the same this time. Amidst volatility, TSLA stock has remained sideways in the last 12 months. This is possibly an indication of the point that the bottom for the stock is around $160 to $180 levels.
Of course, deliveries have disappointed and with cut in prices, it’s likely that pressure on margins will sustain. However, Tesla is well positioned fundamentally to navigate the headwinds. Further, the Company has potentially game-changing plans in the pipeline.
As an example, Tesla is moving towards an “unboxed” approach. It’s like “building Legos than a traditional production line.” The new approach is likely to help in cutting cost by 50%. If this is achieved, Tesla will be positioned to expand margins. Further, the long due low-cost car might be on the cards for emerging markets. Therefore, innovation is the key and Tesla is on the forefront of innovation driven growth.
BYD Company (BYDDF)
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For Q4 2023, BYD Company (OTCMKTS:BYDDF) sold more electric vehicles than Tesla. With a leading market share, BYD is among the top EV companies to hold in the portfolio for multibagger returns.
It’s worth noting that in the last 12 months, BYDDF stock has declined by 16%. This is on the back of macroeconomic headwinds and pricing pressure due to intense competition. However, the stock looks attractive at a forward price-earnings ratio of 20.1.
An important point to note is that China accounted for 60% of global EV sales last year. With BYD Company having a market share of 35.5% in China, the growth outlook remains positive.
It’s also worth noting that BYD is working on boosting presence in markets like Brazil, Indonesia, and India. In Brazil, the Company is constructing a new manufacturing facility with an annual production capacity of 150,000 units. These potentially high-growth markets will ensure that BYD continues to remain among the top two EV players globally.
Li Auto (LI)
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Li Auto (NASDAQ:LI) stock has witnessed a deep correction in the recent past. The reason is relatively disappointing numbers for Q1 2024. I see this as a golden buying opportunity with LI stock trading at a forward price-earnings ratio of 17.5.
I like the fact that Li Auto has exclusive focus on Chinese markets. The Company is boosting its retail presence and EV charging network within the country. The results have been exceptional when we compare deliveries growth and vehicle margin with the likes of Nio (NYSE:NIO) and XPeng (NYSE:XPEV).
Concentrated presence has ensured that the Company is able to curb cost. Further, the balance sheet is string with a robust cash buffer of $13.7 billion as of Q1 2024. With the recent launch of Li MEGA and Li L6, it’s likely that deliveries growth will be strong.
It’s also worth noting that Li Auto is working on next-generation EV technology and smart vehicle solutions. In the coming years, it’s enhanced features within the EV that will be the differentiating factor. Focus on technology is likely to ensure that Li Auto remains ahead of the curve.
Panasonic Holdings (PCRFY)
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Some of the best EV stocks have witnessed a meaningful correction in the last few quarters. However, Panasonic Holdings (OTCMKTS:PCRFY) stock has remained sideways.
The reason is that PCRFY stock is already oversold. A forward price-earnings ratio of 8.5 underscores my view. It’s therefore a good time to accumulate before this innovation driven EV battery manufacturer stock surges higher.
It’s worth noting that Panasonic has aggressive expansion plans. The Company intends to quadruple its EV battery capacity to 200GWh by 2031. I must agree that expansion plans for the foreseeable future have been scaled down. However, once growth accelerates, Panasonic has ample flexibility to aggressively invest. This provides revenue growth visibility coupled with potential EBITDA margin expansion in the coming years.
On the innovation front, Panasonic is targeting to boost battery energy density by 25% from current levels. To achieve this, the Company is looking at nano-composite silicon anode material for EV lithium-ion batteries. Focus on innovation will ensure that Panasonic maintains its market share.
Lithium Americas (LAC)
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With the plunge in lithium prices, some of the best lithium stocks have witnessed a sharp correction. I see this as a good accumulation opportunity for the long term. Considering the impending lithium supply-gap, it’s likely that the metal will trend higher in the coming years.
Lithium Americas (NYSE:LAC) is possibly the best name to consider among lithium stocks. Even with multiple positive business developments, LAC stock has remained depressed. I would not be surprised with a big breakout rally once lithium trends higher.
As an overview, the Company has ownership of the Thacker Pass project. The asset has an after-tax net present value of $5.7 billion with a mine life of 40 years. Further, the Company has guided for annual EBITDA of $2 billion from the asset once both phases commence production.
With the financing backing from General Motors (NYSE:GM) and the U.S. Department of Energy, the Company is working on the construction phase. The recent fund raising of $275 million through equity offering has also ensured that the project financing gap is closed.
Blink Charging (BLNK)
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After an extended period of correction, Blink Charging (NASDAQ:BLNK) stock has remained sideways for year-to-date. I see this as a good time to accumulate this EV charging infrastructure stock with positive business developments on the cards.
For Q1 2024, Blink Charging reported stellar revenue growth of 73% on a year-on-year basis to $37.6 million. For the same period, gross margin increased by 195% to $13.4 million.
An important point to note is that Blink has guided for full year gross margin of 33%. Additionally, the Company has reiterated its guidance for achieving positive adjusted EBITDA by the end of 2024. If this target is achieved, I expect BLNK stock to surge.
I must add here that between Q1 2021 and Q1 2024, service revenue has increased at a CAGR of 189%. As more EV charging stations are installed, I expect healthy growth in service revenue to swell. This will support EBITDA margin expansion beyond 2024. Therefore, business metrics are encouraging in terms of top-line growth and profitability.
Solid Power (SLDP)
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Among companies working on the commercialization of solid-state batteries, Solid Power (NASDAQ:SLDP) is an attractive bet. If the Company can achieve success, I expect SLDP stock to deliver 20x to 30x returns from current levels.
One reason to be bullish on Solid Power is the backing of strong automotive partners. This includes Ford (NYSE:F), BMW (OTCMKTS:BMWYY), and SK On. As a matter of fact, the Company has licensed its cell design and technology to BMW and SK On for parallel research and development. This is likely to support an accelerated move towards commercialization.
Last year, Solid Power had delivered A-1 sample cells to automotive partners for validation testing. The Company is targeting to advance its cell design and deliver A-2 sample cells to automotive players in 2024. At the same time, the Company has expanded its electrolyte sampling with shipments to multiple potential customers. The progress has therefore been positive and with a healthy cash buffer, investment in R&D will continue.
On the date of publication, Faisal Humayun 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.
