Electric Avenue: Which Way Should You Turn For the Best EV Stocks?
Electric Avenue: Which Way Should You Turn For the Best EV Stocks?
Are you plugged into the world of EVs? These car manufacturers make futuristic innovations which could save our planet and keep us mobile! Today, we're looking to uncover the space's top investments.
Happy Monday, and welcome to another edition of Investing Intel from the team at ValueTheMarkets! As always, the newsletter is packed with stock picks and investing insights we think you’ll enjoy, including:
👉 Three stock insights
👉 Investing signals
👉 Fear & Greed Index
👉 Key dates for your diary
👉 Some fun facts!
This week, we’re hitting the road with some Electric Vehicle (EV) stocks and industry insights!
The transition towards clean energy and sustainable transportation has been a significant trend in recent years, and EVs are a crucial part of this gear shift (even though the vast majority are automatics).
With governments around the world setting ambitious targets to phase out fossil-fuel-dependent vehicles, the demand for EVs is rapidly increasing.
As a result, the industry has been attracting some pretty juicy investment, and some stocks (naming no names yet) have been making eye-catching headlines with their strong performance, innovative tech, exciting potential and controversial CEOs.
That’s why we’ve picked out three stellar EV stocks with different facets for investors to enjoy. Read on to find out more!
The Market Leader - Tesla (NASDAQ: TSLA)
You’d have to be living on Mars not to have heard of Tesla (NASDAQ: TSLA). Come to think of it, even the red planet might not be far enough away to avoid hearing about this company, which has the largest market cap of any auto manufacturer, due to CEO Elon Musk’s spacefaring ambitions.
But why do why like the stock?
First off, the business has established itself as a market leader in the electric vehicle field, with the last decade having seen Tesla build a strong brand image and reputation for producing high-quality, innovative vehicles.
Furthermore, the business’ production and sales are both on the up. Tesla has been investing heavily in building new production facilities, such as Gigafactories in the United States, China and Europe. Consequently, production increased by almost 50% in 2022.
This led revenues to soar by 51%, while margins improved as economies of scale began taking effect.
Not everything is rosy for the stock, with TSLA having almost halved in price over the last 12 months. There’s also the issue of the sometimes burdensome leadership of CEO Elon Musk, who is a key draw for some investors but has become an increasingly divisive figure. Even so, the eccentric South African has led Tesla to remarkable growth and few would deny that he is something of a visionary.
On the whole, this business looks superbly placed to continue exploiting the EV space as a market leader and so looks like a solid growth stock pick right now.
Key points:
Market Leader
Innovator
Rising production
Growing sales
Share price slump
Big in China - Li Auto (NASDAQ: LI)
Li Auto (NASDAQ: LI) is a little earlier in its journey than Elon Musk’s EV giant. However, the company is also enjoying production and revenue growth, with the latter having increased by 67% in its latest reported quarter.
Gross profits appear to be on an upward trajectory too, even at a time when supply chain issues are causing difficulties for other Chinese EV manufacturers.
While Tesla is doing well in North America and Europe, Li Auto appears to be in a good position to benefit from strong growth in its domestic EV market. This growth is driven by government targets and consumer demand, presenting significant opportunities for Li Auto to increase its sales and market share.
It’s also worth noting the unique nature of the company’s product offering. Li Auto has a particular focus on extended-range electric vehicles (EREVs), which combine the benefits of electric powertrains with the flexibility of gasoline engines.
However, the business is also veering towards all-electric offerings as Chinese charging infrastructure improves and range limitations become less of a factor. Li Auto looks like an opportunity to invest in a promising business that serves the planet’s largest EV market and has opportunities to expand significantly.
Key points:
Growing revenue
Increasing production
Chinese market growth
Unique product
The Outsider - Polestar Automotive (NASDAQ: PSNY)
If you’re looking for an investment that’s a little more high-risk, look no further than Polestar Automotive (NASDAQ: PSNY).
The business is an early-stage EV company with a focus on the luxury market, but you might not have heard of it. The company is currently focused on the European market, but its vehicles are also available in North America and China.
Polestar’s most recent full year saw it reach its targets of delivering 50,000 vehicles and growing revenues by more than 80%. The business says this growth has been driven by demand for its Polestar 2 model, which is set to be followed by two more new vehicles in the next two years.
It also narrowed the gap towards profitability during the period, indicating that Polestar is doing a sensible job of managing its growth.
The business has great backing to guide its growth even further too, with Swedish car giant Volvo acting as its largest shareholder.
Polestar’s share price has deteriorated significantly over the past year, dropping by almost 70% to sit below $3.50. For fledgeling growth stocks which are not near profitability, the current high-interest rate environment is hardly friendly.
However, the business appears to have real potential and so could be a great investment for someone who doesn’t mind a bit of risk.
Key points:
Rising sales
Narrowing losses
Big-name backing
Share price dip
Investing Signals
First off, let’s look into some trends and info from the EV space!
According to analysis from S&P Global Mobility, EV sales grew by 36% in 2022. This growth is expected to continue in the long term, but S&P noted that the current year presents several challenges to the industry, including the end of Chinese subsidies for EV manufacturers, high-interest rates, the European energy crisis and US economic woe.
These are the kinds of challenges which are often cited for the dips in share price we’ve seen for several EV companies, including our three stock picks.
However, the longer-term picture appears brighter.
The International Energy Agency says global EV sales will still reach record levels this year, projecting 35% growth. Additionally, the organisation claims that EVs will account for around 60% of all vehicle sales across China, the EU and the United States by 2030.
Legislation like the EU’s ‘Fit for 55’ package, which is a commitment for the bloc to reduce its net greenhouse gas emissions by at least 55% from 1990 levels by 2030, will contribute to this acceleration of electrification.
Now, let’s examine some more general trends from the past week. In terms of trending stocks, the most Googled equities from the past week are:
Fox Corporation (NASDAQ: FOX)
Activision Blizzard (NASDAQ: ATVI)
First Republic Bank (NYSE: FRC)
Chipotle Mexican Grill (NYSE: CMG)
Seres Therapeutics (NASDAQ: MCRB)
Fox Corporation heads the list after an action-packed week which saw the business give the boot to controversial Fox News star Tucker Carlson following the $787.5m Dominion lawsuit settlement. Carlson’s exit alone saw the share price slump by more than 5%.
Activision Blizzard stock also had a tough week after a bid to acquire the videogame giant from Microsoft (NASDAQ: MSFT) was blocked by UK competition regulators. The software behemoth’s President, Brad Smith, reacted angrily to the decision, telling the BBC that it was “bad for Britain”.
First Republic Bank’s spot on the list represents further negative news. The troubled company has seen its share price plunge after it admitted that customers had withdrawn deposits of more than $100bn in March, sparking fears about its future.
A ray of sunlight comes in the form of fast food chain Chipotle Mexican Grill, which reported earnings ahead of expectations following new store openings. Seres Therapeutics caps off our list, with the biotech company generating chatter after the US Food and Drug Administration approved its Vowst treatment for bowel disorders.
Fear & Greed
The Fear and Greed Index is a measure of stock market sentiment calculated by CNN Business using seven measures including market momentum, market volatility, and safe haven demand. It’s meant to shed light on the emotions currently driving the market, giving you insight into how traders are making decisions. Remember, traders are humans, not robots.
As you can see from the graphic below, investment sentiment appears to have plateaued from the fear we were still amidst just one month ago. Any momentum towards greed appears to have been stymied, at least for the moment, by a slew of negative news stories this week and an expected interest rate hike next week.
Dates in the Diary
Monday 1st – US Manufacturing PMI (Apr)
Tuesday 2nd – US Jobs Data (Mar) / US Factory Orders (Mar) / US Total Vehicle Sales (Apr)
Wednesday 3rd – US Fed Interest Rate Decision / EU Unemployment Rate (Apr) / US ISM Services PMI (Apr)
Thursday 4th – EU PPI Data (Mar) / US Balance of Trade (Mar) / ECB Interest Rate Decision
Friday 5th – US Non-Farm Payrolls (Apr) / US Unemployment Rate (Apr) / EU Retail Sales Data (Mar)
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Fun Fact – Bizarre Bellringers
You’ve probably seen the opening and closing ceremonies at exchanges like the NYSE, NASDAQ, London Stock Exchange or another.
These ceremonies normally involve a company’s leadership team waving, cheering and awkwardly ringing a bell as they seek to showcase their business through this brief moment in the sun.
But who are the strangest guests to lead these ceremonies?
Many eccentric characters have been featured, including Gin & Juice enthusiast Snoop Dogg, KISS frontman Gene Simmons and WWE wrestler Triple H.
Fictional characters such as the Smurfs and Mr Potato Head have even made the grade.
Darth Vader made an appearance in 2009 in promotion of LucasFilm alongside R2D2 and a cadre of Stormtroopers. It might have been more fun if he was there to promote a stock with the ticker symbol ‘SITH’, but maybe that’s hoping for too much…
Until Next Time
Many thanks for taking the time to enjoy Investing Intel today, we hope you’ve enjoyed our insights and are looking forward to more in the week ahead.
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Adios Amigos!