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Analysts flash their headlights at these Tesla-rivalling EV stocks
More EV stocks to potentially rival Tesla have been flagged by a couple of big investment banks this week. Are they about to put the pedal to the metal?
Are these EV stocks worth watching?
Most of the conversation around electric vehicles includes Tesla in some shape or form – even pieces about its rivals.
But Tesla, despite its reputation and size, is not the only electric car manufacturer in town. Legacy marques are starting to rapidly expand their battery-powered vehicle ranges. VW, Ford, and GM alone are planning to spend in excess of $150bn to develop batteries and cars going forward.
Tesla’s competitors are now a mix of the old and the new. It’s likely the EV space won’t just be dominated by Elon Musk’s brand. It will no doubt remain a big player, for sure, but other companies, both established and up and coming, are revving their engines to get their own share of the EV market.
As such, electric vehicle stocks are quickly driving their way into many investors and traders’ portfolios.
JPMorgan’s electric vehicle stock picks
JPMorgan’s head of European autos equity research, Jose Asumendi, recently said that his two top EV equities to watch are Stellantis and Daimler.
“Stellantis is one of the leaders with electrification in Europe,” Asumendi told CNBC. “What I like about Stellantis’ strategy is not only the product launches but also the battery strategy,”
Stellantis is a joint venture between two of Europe’s most revered car builders: Peugeot and Fiat. A constellation of 14 brands fall under this umbrella. Vauxhall, Opel, Citroen and EV-spin off DS, Chrysler, Dodge, Jeep and Maseratti are just some of the badges Stellantis boasts.
Importantly, the brand is committed to EV development as well as battery research and construction.
In H1 2021, just 14% of Stellantis deliveries were electrified vehicles. In the US, the figure was 4%. With sustained multi-billion-dollar investment, the carmaker expects this to rise to 70% and 40% in these respective territories by 2030.
Key to Stellantis’ stock success will be how the brand copes with a) the global chipset shortage and b) ongoing restructuring of some of its constituent brands.
“We thought all these brands [that Stellantis owns] were going to die at some point and go bust, but it turned out to be different,” Asumendi said. “But now CEO Carlos Teveres is doing the same thing with Alfa Romeo, Maserati and Fiat. So Stellantis offers real opportunity to invest into this European restructuring equity story.”
The company also formed an entity ACC to develop property battery tech alongside Asumendi’s next pick Daimler.
Daimler is Mercedes-Benz’s parent company.
It is planning to split out its truck division away from the Mercedes cars section by the end of the year, creating two separate entities without diluting the brand.
“You will have two companies clearly run under the same hat: Mercedes-Benz Cars and Mercedes-Benz Trucks,” Asumendi said.
Asumendi was also keen to heap praise on Daimler CEO Ola Kallenius and CFO Manish Thakore. Together, the pair have been able to drop the fixed cost base of a Mercedes-Benz car by 20%. That suggests better margins for the prestige brand going forward.
But as this is an EV-focussed piece, we have to mention Daimler’s electric ambitions. In July, the German giant announced its plan to spend $47bn on overhauling its output to fully embrace electric power. No new petrol-powered models will be introduced from 2025 onwards. Bad news if you enjoy the throaty roar of an AMG V12, good news for Mother Earth.
Asumendi set price targets for both Stellaris and Daimler based on their backing of electric transport. For Stellantis, the figure is €28 – quite above the current level of €16.51 (up 3.5% on the day at the time of writing. Asumendi’s Daimler price target sits at €98. Daimler is also currently up around 3.5%, trading for €78.38.
Goldman upgrades NIO
NIO is essentially the Chinese Tesla.
The company’s stock has pulled away somewhat from highs seen at the start of January to the tune of 50%. But, according to Goldman Sachs, the EV brand has high potential.
Goldman recently upgraded NIO from a neutral to a buy with a target price of $56. At the time of writing, NIO was up 6.1% on the day, exchanging hands for $35.81.
As well as launching a collection of SUV models aimed squarely at the domestic market, NIO has also brought the ET7 saloon to market. This has caught Goldman’s eye.
The ET7 itself is a luxury sedan, designed to compete with the Tesla Model S and European rivals like the BMW 7 Series or Mercedes-Benz S-Class. The two German models regularly push $200,000 in China.
That’s why the ET7’s pricing, more in line with the BMW 5 Series or Mercedes E-Class, has attracted Goldman.
“The price point makes ET7 China’s most expensive car model ever launched by domestic manufacturers, strengthening NIO’s brand equity in the premium space,” Goldman explained in a research note.
NIO’s battery as a service model, where users essentially lease their battery from the car maker, is also a plus point for Goldman. It does seem like a rather anti-consumer move, essentially a subscription to power your car on top of tax, insurance, and electricity, but it would present an extra revenue stream for the brand.
EV stocks: legacy marques hit the electric accelerator
Tesla might be the face of electric vehicles, but long-standing manufacturers are matching its spending. Here are some EV stocks to watch.
2021 & electric vehicles
Electric vehicles really do look like the future.
Sales volume tripled year-on-year in H1, according to Woods Mackenzie research. WoodMac predicts 6 million electrically-powered vehicles will be sold by the end of 2021. That’s even with chipset supply constraints.
No year to date will have seen such internal combustion engine sales displacement should WoodMac’s forecast prove true.
We all know of Tesla’s electric vehicle market dominance. Many newcomers in the EV space are in danger of being left in Tesla’s shadow. While the likes of NIO and Li Automotive are attempting to put up a fight, as new brands go Tesla is driving far into the distance.
But what about legacy carmakers? These, in theory, have the supply chain capability, resources and existing market presence to potentially dwarf Tesla going forward. It’s only a matter of time before the sleeping or drowsy giants wake up and put their full industrial might behind EVs.
We’ve already seen the likes of Citroen and Volvo spin off their electric offer into new brands (DS and Polestar in this instance). Indeed, Polestar looks like it’s becoming very much its own entity and is even planning a $20bn SPAC IPO sometime soon.
Even Ferrari, which has resisted the call of pure electric power, for so long is following in the wake of luxury automakers Porsche and Aston Martin in offering a fully EV supercar by 2025.
But not all car manufacturers are created equal. There are those that dominate with their major global presence. These are the ones responsible for the global prevalence of motor vehicles to begin with. And it’s these that have enormous potential.
The largest automakers and conglomerates are pouring billions into electric vehicle research. Some are better prepared than others, but this level of investment can pay dividends in terms of positive stock price movements.
Traders and investors thinking about diversifying their portfolios with EV stocks may find some inspiration below.
Legacy EV stocks to watch
Henry Ford pioneered mass auto manufacturing as we know it. Now the company he started is keen to add his level of ingenuity to their model line-up.
Ford recently announced it was planning on spending $30bn on EV R&D by 2025 and expected 40% of its total sales to come from this market segment by 2030. Its goal is to launch 16 fully electric vehicles by 2022.
Pre-orders for the electric F-150, the truck that the company is essentially built on, have already reached 150,000. Oh, it also has plans afoot to invest $11.5bn in a battery-making facility to support the F-150 exclusively.
F-150 sales average 100 trucks sold per hour. Mr Musk with your Tesla Cybertruck: Ford is coming for you.
In terms of share price performance, Ford is up nearly 2% in day trading at the time of writing.
As well as its electric plans, Ford has been boosted across the previous months by its Q2 2021 earnings. During this time, the brand recorded a surprising $1.1bn profit, readjusting its earnings per share from a loss of $0.03 per share up to EPS of $0.13.
Ford raised its expectation for full-year adjusted earnings before taxes by about $3.5 billion, to between $9 billion and $10 billion.
Additionally, since CEO Jim Farley took control in October 2020, Ford’s share price has soared 113%.
According to its website, General Motors plans to invest $35bn between now and 2025 towards creating a fully electric future.
With this 30% rise in dedicated electric vehicle spending, the US’ number one carmaker certainly has Tesla and other rivals squarely in its crosshairs.
In practical terms, this means a complete model overhaul and construction of dedicated production facilities. That includes two new battery megafactories. One of these is already underway in partnership with Korea’s LG Energy Solutions, while another site is being prepped in Tennessee.
GM confirmed in November it would speed up the rollout of new EVs, with plans to offer 30 models globally by 2025, up from a prior target of 20 by 2023. Chief Executive Mary Barra said the automaker wants to exceed annual sales of 1 million EVs in the United States and China by 2025.
General Motors also recently announced it plans on investing $300m into Chinese auto-pilot developers Momenta to help grow develop self-driving technologies. This could also help GM get its own slice of the lucrative Chinese automotive market – the largest in the world.
In terms of share price outlook, Goldman Sachs recently came out as saying it thinks GM is undervalued.
“General Motors (NYSE:GM) is seen as an attractive stock that captures the benefit from an industry recovery in production as well as opportunities to benefit from EVs and advanced driver-assistance systems,” Goldman analyst Mark Delaney said.
GM started the week on a good footing, rising 2.25% on Monday 27th September. It has subsequently flattened but there are reasons to look at the stock in a bit more depth.
Its E/P ratio of 6.04 makes it undervalued. Additionally, analysts expect its earnings to fall by 5.3% this year before rising at an average annual rate of 13.25% over the next five years. Might be worth a look in the short term.
Volkswagen’s own spending plans dwarf those of the American rivals above.
Across the next five years, the Wolfsburg-based marque will have spent $86bn on a fully comprehensive overhaul of its production capabilities and model collection. Looking further afield, it plans to make 70 fully electric vehicles by 2030.
231,600 VW EVs were sold in 2020. It has plans to double that to 500,000 by the end of 2021. Adding in plug-in hybrid models, overall sales target for vehicles involving some modicum of electric power comes to 1.5m.
VW also has its eyes on the Chinese prize. It has announced it is launching its ID.3 and ID.4 models in China soon. The ID.4, an electric SUV, will be key to Volkswagen’s Asian expansion plans as this particular car style is a favourite amongst Chinese consumers.
The company’s stock has increased 120% from 2018 up until now, although Forbes believes it is currently reaching the limits of its mid-term potential.
Future earnings will be key in accruing decent performance for VW.
Forbes’ breakdown of the FY2022 outlook is as follows:
- Revenues – €254 billion
- Net income – €13.8 billion
- EPS – €2.75
- Stock price valuation – $47
Of course, VW’s work also includes that of Audi which is launching its own range of luxury EV models. All of its eggs are currently in one big electric basket, but it could pay off as the world moves away from fossil fuels.
Are EV stocks running out of juice?
With some EV stocks running into the red, we take a look at the sector to see if it’s electric vehicles’ time to step on the gas or hit the accelerator.
Electric vehicle stocks drop
Several electric vehicle stocks were running out of juice at the start of the week.
Chinese stocks, such as Xpeng, Nio and Li Auto all started trading poorly, although it should be noted that Xpeng and Li are both up 0.93% and 1.01% respectively at the time of writing. Nio remains down 1.37%.
Even Tesla, Elon Musk’s shining beacon of electric vehicle innovation, is subdued, down 2.96% in pre-market trading on Wednesday 18th August.
In the case of Tesla, a new NHSTA probe into the safety of the carmaker’s autopilot system has once again caused a wobble in its share price. The agency highlights 11 crashes that occurred when Autopilot or Traffic Aware Cruise Control systems had been engaged. In fact, Tesla has been under NHSTA investigation since 2016.
Not a great look when Tesla is attempting to position itself as an AI innovator as well as an EV champion.
Nio is also under the crash cosh. A prominent Chinese entrepreneur was tragically killed while testing a Nio ES8 equipped with automatic motorway lane changing software.
Such measures are meant to remove the human element in order to boost safety. Naturally, there will be teething issues if that’s not too glib a term at this early stage in development. But if said features are resulting in car crashes and a loss of human life, then EV stock prices are going to fall. Investor confidence is everything, after all.
Then there are supply chain and logistical considerations to consider. The worldwide computer chip shortage has impact production and vehicle delivery numbers for pretty much all car manufacturers. That includes both internal combustion-powered and electric vehicles.
If you’re unable to build and deliver cars in line with demand, your revenues will probably fall and take your share price with it.
Even companies like Tesla, which delivered a record number of vehicles in the last quarter, will feel the pinch going forward. Developing and manufacturing proprietary chipsets was ruled out by Tesla CEO musk as being too costly.
Can you still ride the EV boom?
Of course. The fact is electric vehicles are pretty much guaranteed to be the future. Even if the course steers ICEs to hybrids to fully electric vehicles, the world is moving away from fossil fuel power.
The UN’s Code Red climate report could precipitate a more rapid move to EVs. We’ve also seen plenty of mandates from the EU, UK and now the US to force legislation toward a purely electric-powered future.
The Biden Administration, for instance, is pushing for half of all new vehicle sales to be EVs by 2030. Similar directives are in place in Britain and the European Union.
EV marques are doing their best to improve their offers. Tesla has committed to a massive expansion programme of new mega factories and updated models. Xpeng has plans afoot to double its annual production capabilities from 100,000 to 200,000 vehicle deliveries per year. It’ll be expanding its line-up to include a new SUV too – a car class that’s a favourite of the Chinese middle class.
The appeal of EVs is still strong for institutional investors. A number of banks and investment firms have upped their holdings in Chinese manufacturers for instance, including:
- Baillie & Gifford – Now holds 14.83m shares in Li Auto
- Goldman Sachs – Now holds 21.44m shares in Nio
- Fidelity Investments – Now holds 13.35m shares in Xpeng
With any major sector, however, you can’t just look at one segment, no matter how large it is. Electric vehicles rely on a massive ecosystem of battery suppliers and chipset/semiconductor manufacturers. It’s here where canny traders and investors may be able to diversify their portfolios when looking at EV stocks.
Analysts have identified several stocks that could offer strong upsides as the electric vehicle industry expands.
- NXP Semiconductors – This company derives half its annual revenues from the auto industry
- Skyworks Solutions – Has plans afoot to greatly expand its EV offer after purchasing peer Silicon Labs’ auto and infrastructure segment
- TE Connectivity – Swiss censors firm recently posted a 52% year-on-year increase in revenues, totalling $3.8bn. EPS came in at $1.79.
- Aptiv – Ireland-based vehicle components manufacturer has a market cap of $44bn and generated $13 in revenues across 2020.
- Freeport-McMoRan – An Arizona-based mining firm with a speciality in copper, Freeport-McMoRan represents the wider infrastructure needed to build electric cars. It has plans to invest in growth projects, which prompted Deutsche Bank to rate the stock as a “buy” in July.
This is just a small snapshot of the types of stocks that could thrive in a world dominated by electric power.
So, while EV stocks are currently on a bit of a negative trajectory, this could all very well change as the industry progresses. It’s one segment to watch closely in the future.
Thematic investing: electric vehicles
Electric vehicles are gaining traction among car owners, legislators, and fleet operators worldwide. Can the same be said for investors? In our latest thematic investing guide, the spotlight turns to EV stocks.
EV stocks & why you should consider them
Goodbye ICE. Hello EVs
More and more EVs are appearing on the world’s roads. Drivers have long enjoyed the freedom of movement afforded to us by Nicolaus Otto’s people-empowering invention but the internal combustion engine’s days are numbered.
The environmental cost of fossil-fuel-powered engines is getting heavier. Slowly, but surely, the chug of a diesel engine or the throaty roar of a high-powered V8 will disappear from our roads.
The changeover may be coming even faster than that. Reports indicate the EU will move to ban sales of new ICE vehicles as early as 2025. The UK has brought its ban forward to 2030. The book is closing on petrol and diesel. The next chapter begins with lithium-ion battery-powered machines.
Proliferation is not total. ICE still dominate everyday driving, but EVs sales continue to grow year-on-year, quarter-on-quarter.
More pure EVs and plug-in hybrid models are on the roads in key automotive markets. 245,000 fully electric models, plus 515,000 hybrid vehicles, were registered in the UK by the end of April 2021, for instance, representing just over 13% of all registered vehicles.
In China, pure battery-powered car sales were up 113% in Q1 2021, with 333% more hybrids being sold in the same period. Overall EV sales in the US in the first quarter of 2021 shot up 81% too. The appetite for electric power is spreading among vehicle owners.
Tesla is arguably the most visible electric vehicle brand. Its optics are massive, especially with relentlessly self-publicising CEO Elon Musk in the driver’s seat. That said, the race is on to develop hybrid and electric vehicles by legacy marques, as well as new badges hoping to overtake Tesla.
It was Toyota that really got the hybrid trend rolling with its iconic Prius model, launched for worldwide sales in 2002. Now, all the major marques have at least one hybrid model in their range or adding one.
Even luxury brands like Aston Martin are in the act. The “big three” of hypercars, the Porsche 908, Ferrari La Ferrari and McClaren P1, are all hybrid-drive vehicles for example.
Ford has even transferred its iconic Mustang name to a new electric model, launched in 2020. Renault has plans to resurrect its cheeky-but-charming 5 as a full EV too. VW is planning for its ID range of four electric models will be the core of its range as it pivots towards full electrification.
The list of car manufacturers making the jump to electric power is extensive, but here are some stocks below to keep an eye on.
EV stocks to watch
Beginning with the biggest name in EVs, Tesla shares have been a bit of a journey across the year so far.
The Elon Musk-controlled marque was soaring, closing January 2021 at $883 – an all-time high.
Now, a combination of concerns over criticisms from the Chinese market, fatal accidents caused by Tesla’s autopilot system, rising competition, and questions over the brand’s acquisition of $1.5bn worth of Bitcoin cryptocurrency, has caused Tesla’s share price to drop. As of May 21st, Tesla stock was trading at around $593.50.
Despite this, Tesla increased vehicle deliveries in Q1 2021. Net income hit $438 million during the quarter. Earnings of 93 cents per share on $10.39 billion in revenue.
New Tesla models are on their way. An updated version of the flagship Model S sedan is coming soon. The Model X SUV will start rollout in Q3 2021. It has also weathered the EV chip shortage by pivoting to new suppliers, meaning manufacturing can continue relatively undisturbed.
However, if you are considering investing in Tesla stocks, make sure to do your research. Michael Burry, the hedge fund guru who gained fame for exploiting the 2008 Financial Crisis, is shorting $534m worth of Tesla shares, indicating he thinks further stock price declines are on their way.
A bumpy ride may be ahead for Tesla – but its major brand recognition and positive financial outlook may help steer it back on a growth footing in 2021.
Nio is not the largest Chinese electric automaker, but it is making big waves.
Q1 2021 saw NIO deliver just over 20,000 vehicles – a more than 400% y-o-y increase. NIO has already delivered about 95,000 vehicles in total in the year so far. It is leading the way in China’s electric SUV market too, selling slightly more than 7,100 in April, outpacing Tesla.
In terms of prices, NIO shares are showing similar volatility to Tesla. Since the start of 2021, NIO stock is down 37.5%. Year-to-date, however, NIO share price has soared 870%. Market cap stands at around $55bn. Currently, NIO stocks are trading at around $34.50.
So where next for NIO? It’s already showing impressive sales growth figures. China is already the largest auto market in the world. It’s forecast to become the largest EV market too, accounting for 40% of the 31.1m global EV sales Deloitte predicts for 2030.
For NIO, being a native Chinese brand is a huge advantage here. It is protected by domestic laws favouring homegrown brands over foreign marques like rival Tesla. It already holds 23% of the electric SUV segment too. If it can maintain deliveries, NIO and its shares may look very positive in the future.
The above EV stocks are manufacturers that deal exclusively in pure electric, battery-driven vehicles. Volkswagen is a legacy marque. While it has made substantial headway in introducing its ID range of electric cars, it is still a manufacturer of ICE-powered machines.
That said, it has an aggressive electrification plan in place. A new factory has been built dedicated solely to EV production at its Wolfsburg campus. It’s even pushing for one million EV sales by the end of 2021, with the ID.4 model identified as VW’s electric golden goose.
VW shares were up 62.3% from the start of 2021 to the beginning of April, reaching $258. As of May 21st, the share price had grown further with VW shares changing hands for $272. Optimistic electric vehicle sales are potentially powering this growth. VW may be on course to outsell Tesla in 2022 if it can maintain successful sales.
Here’s the rub. While Tesla had an enormous head start over legacy manufacturers, once the full weight of Toyota, VW, GM, Ford and so on is turned towards non-ICE cars, it will be difficult to match their potential output. These are companies with already massive manufacturing capabilities and the capital to invest in new factories and product lines as we’ve already seen. Therefore, don’t think of single-play manufacturers when looking at EV stocks. Remember established automakers too.
Risks in investing & trading EV stocks
Whether a newer brand or a legacy marque, always remember trading EV stocks comes with inherent risks. Market volatility has been seen in the electric vehicle space. While profits can be made, you can also lose money. Always do your research and only invest or trade if you are comfortable taking any potential losses.