The automotive industry is in the midst of a sea change. A combination of pressures – social, environmental, and political – are pushing the industry faster and faster toward electrification.
The political tailwind may be the most prominent, at least for now. The Biden Administration is pushing to make half of all new car sales in the US electric by 2030. This includes electric battery powered vehicles, fuel-cell electric vehicles, and plug-in hybrids – with the last category offering a potential workaround for issues relating to capacity of the power grid. This push will require a massive increase in EV manufacturing, as these cars currently make up only some 2% of new car sales. Likely, some combination of governmental incentives and regulations will be used to encourage higher production.
For now, we can note that Detroit’s major automakers are hardly shying away from EVs. GM is developing a $35 billion plan to transition from conventional cars to EVs and autonomous vehicles, with goals set for 2025. Ford Automotive is also investing heavily in the electric sector, committing $11 billion to both an EV assembly plant and several new battery production facilities. Backing these investments is a perception of public demand – as seen by Tesla’s recent delivery numbers. The upstart EV maker, whose cars are notably high-end, delivered over 241,000 new vehicles in Q3, a company record and a 73% year-over-year gain.
But the big names aren’t the only ones in town when it comes to EVs. Smaller companies have an opportunity here, as the rapid expansion of a new industry is opening up new niches that nimble competitors can enter.
Bearing this in mind, we used TipRanks’ database to find two compelling EV stocks, according to Wall Street analysts. Both tickers are priced affordably, under $10 each, and boast a Strong Buy consensus rating. And best of all, these stocks could climb over 100% higher in the year ahead.
We'll start in the trucking industry. Xos is a specialized electric truck manufacturer, with a focus on all-electric trucks in the medium- and heavy-duty size and cargo ranges. The company takes an interesting approach to these vehicles, designing and marketing them to bypass one common complaint about EVs – lack of range. Xos’s trucks are optimized for urban ‘last mile’ delivery operations.
The company’s trucks take advantage of common driving conditions in the last stage of the delivery chain, where urban traffic and multiple unloading stops typically keep mileage per day per vehicle in the 100 to 150 rage. This fits well with typical battery charge capacity, while an electric vehicle also avoids burning gasoline while stopped in heavy traffic or at loading docks. And by operating in urban environments, the trucks remain relatively close by their charging stations. In short, Xos has found a way to turn a complaint about EV batteries into a selling point for electric trucks.
Xos builds its trucks with two starting points – a customizable powertrain-chassis, coupled with a proprietary battery system. The body of the truck can be adapted for the customer’s particular needs, allowing for everything from tractor trailers to the iconic UPS delivery van. Xos currently has test-bed electric truck platforms in operation with two trucking companies, Loomis Group and Wiggins Lift Co.
In August of this year, Xos entered the public trading markets through a SPAC combination with NextGen Acquisition Corporation. The transaction was approved on August 18, and the XOS ticker debuted on the NASDAQ in the August 20 session. Xos realized $216.7 million in cash from the combination.
Among the bulls is 5-star analyst Daniel Ives, of Wedbush, who takes a bullish stance on XOS shares.
“XOS looks to tap into the growing EV market by leveraging its highly experienced management and engineering teams to address the medium to heavy-duty last mile and return-to-base vehicles. Acting as one of the first movers in this burgeoning area of the EV market, XOS has a proven product that is already on the road with the ongoing development of future iterations. The company’s flex manufacturing process is more time-efficient than its counterparts, cheaper than most diesel alternatives, and differentiated by XOS-specific technology, providing the company with the opportunity to capture market share during one of the most significant transformations in the automobile industry since the industrial revolution,” Ives opined.
To this end, Ives rates XOS a Buy, and his $10 price target implies room for a whooping 126% upside potential in the next 12 months. (To watch Ives’ track record, click here)
Ives is not outlier on this new stock, which has a unanimous Strong Buy consensus rating based on 3 positive reviews set in recent weeks. The shares are selling for $4.42 and the $13.33 average price target is even more bullish than the Wedbush view, suggesting a robust 201% upside for the next 12 months. (See XOS stock analysis on TipRanks)
Cars and trucks are hardly the only aspect of the EV market for investors to consider. These vehicles will need a robust charging network, with stations and charge points in spaced throughout the country, with consistent outlets, charge capacity, and accessibility.
Volta, the second stock we’re looking at, is entering the EV charging niche, and taking a unique approach. The company is combining EV charging with on-site advertising, allowing full-color, multi-media video ad on its charging units. This approach lets Volta provide a property owners a way to cash in on space in a parking lot – and an audience. And let’s face it, given the ubiquity of advertising in society today, this was probably inevitable.
The company is moving to secure its intellectual property in this area, and at the end of September announced that it had been issued two new patents for its charging stations. The first, 11,117,482, or Charging Station with Articulating Panels, covers the company’s insight, of a charging station that gives video ads. The second patent, number 11,132,715, is titled Systems and Methods for Providing Targeted Advertisements to a Charging Station for Electric Vehicles, and it covers the video ad presentations. Ads can change, based on whether the station is actively charging or sitting idle.
As for location expansion, Volta announced on October 11 a new installation of charging stations at a Stop & Shop store in Southington, Connecticut. In addition, Volta announced on October 13 a partnership with the hard-surface flooring retailer Floor & Decor to install charging stations in the chain’s parking lots. The partnership aims at charging installations in 8 Floor & Decor locations by the end of 2021, and in locations nationwide during 2022.
Like Xos above, Volta went public in August through a SPAC combination. The transaction, with Tortoise Acquisition Corporation II, was approved on August 25 and the VLTA ticker entered the markets on August 27. Volta raised approximately $400 million in gross proceeds from the combination.
Roth Capital analyst Craig Irwin notes the potential of Volta’s charging/advertising combo, writing: “Volta's commercial hosts split the cost of building the chargers, and often help cover costs to give EV drivers free charging to pull higher spending customers to their properties. Placement of chargers at the front of the parking lot also helps utilization. We see the shares as undervalued versus peers, even excluding Behavior & Commerce revenue, while the media opportunity brings faster profitability versus a generic charging operator.”
In line with his optimistic approach, Irwin gives VLTA shares a Buy rating and his $18 price target suggests an impressive 158% potential upside for the coming year. (To watch Irwin’s track record, click here)
Other analysts are on the same page. With 3 additional Buy ratings, the word on the Street is that VLTA is a Strong Buy. On top of this, the average price target is $14.13, suggesting robust growth of 102% from the current price of $7. (See VLTA stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.