Electric vehicles (EVs) are clearly the next big thing in the automotive industry, and they are supported by both social and political pressures toward ‘green’ technologies. For drivers, they offer a wide range of advantages over gasoline-powered cars: improvements in performance, fewer moving parts to wear out, quieter operations, easier integration into wireless networks.
There are drawbacks, too. For now, EV battery range can match gasoline engines – but only at a higher cost for an already expensive vehicle. On average, EVs cost about $10,000 more than gasoline-powered vehicles, putting them in the price range of an entry-level luxury car. And while they can be plugged into a standard outlet to charge at home – so-called Level 1 charging – that can take up to 40 hours. A specialized Level 2 charger can be purchased for your driveway – but it will cost another $2,000 and still take 8 hours to charge the car.
These are only some of the issues confronting car buyers. Also entering the equation are the rising cost of gasoline and diesel fuels, tax subsidies for EV buyers, and the increasing social cachet of owning an EV. Finally, it’s clear that the Biden Administration has the political will to push policies – especially an expanded public charging network – that will promote EVs and make them more convenient to own and operate.
And now we get to EV stocks. Most of the electric car companies (the exception is Tesla) are still in the speculative stage, while others only just beginning to ramp up production. A majority of these EV stocks are showing depressed share prices in the current environment. But step back and take a broader look: Wall Street’s analysts still have faith in the EV market, and its associated battery industry, and while these stocks may be down, they are showing strong upside potential.
We’re going to take a look at three stocks in the EV universe, two vehicle makers and a battery company. According to the TipRanks database, these stocks hold ‘Strong Buy’ ratings from the Street’s analysts, and boast triple-digit upside potential for the coming year. Let’s find out just why these stocks may double or more in the months to come.
NIO Inc. (NIO)
First up is NIO, a leader in China’s EV sector. Even after its stock has fallen 33% this year, NIO still commands a market cap of nearly $100 billion. NIO was founded in 2014, and began its vehicle deliveries, with the seven-seater ES8 model, during mid-2018. Over the next three and half years, the company followed up with five additional models. The last of these, the smart electric sedan ET5, was launched in December 2021 and has yet to commence deliveries. The company is benefitting from the Chinese government policy of actively promoting electric vehicles, and increased its total deliveries last year by 109% year-over-year, to reach an impressive 91,429.
NIO has released delivery figures for the first two months of 2022, and showing a total of 15,783 for January and February. This puts the company on track to exceed its 2021 figure by 3.5%. While the past of deliveries may be slowing, it is important to note here that in both 2020 and 2021, NIO boasted sequential increases in deliveries every quarter.
In addition to rising deliveries, NIO has also showed rising revenues, with seven sequential quarterly gains in a row. The 4Q21 top line, at $1.55 billion, was a company record, and up approximately 50% year-over-year.
Edison Yu, of Deutsche Bank, writes of this automaker: “NIO has cultivated an aspirational premium brand, underpinned by a leading service infrastructure that no domestic automaker has been able to match, in our view. While volumes have stagnated over the past few quarters due to operational bottlenecks, we think deliveries are on track to increase from 10k/month to 25k exiting the year which will shift the narrative away from supply constraints to product cycle."
"Critical to this, NIO's ET7 and ET5 are set to be the most desired cars in the China market this year, potentially representing category defining products for what many see as an increasingly competitive market… Ultimately, we think the value of all this is worth significantly more than current share price, no matter where the stock is listed,” the analyst added.
Yu’s comments support his Buy rating on the stock, and his $50 price target implies an upside of 151% by year’s end. (To watch Yu’s track record, click here)
It’s clear from the analyst consensus that Wall Street is in broad agreement on NIO's quality. The stock has 18 recent reviews, breaking down to 16 Buys and 2 Holds, for a Strong Buy consensus rating. Shares are priced at $20.90, and their $44.73 average target implies an upside of 113% for the next 12 months. (See NIO stock forecast on TipRanks)
GreenPower Motor (GP)
Next up, GreenPower Motor, is an American EV company, and one with a very different niche than NIO above. Where the Chinese company focuses on the consumer market, GreenPower is working on commercial vehicles, particularly transit busses and light trucks suited for urban ‘last mile’ niches and other short-range transport and delivery tasks.
GreenPower’s most popular vehicles are its line of EV Star light trucks and vans, all based on a single chassis, and its BEAST all-electric school busses. In the most recent reported quarter, Q3 of fiscal year 2022, ending December 31, the company reported deliveries of 15 EV Star-line vehicles and 8 BEASTs. The customers included two school districts in California and the Vancouver International Airport, among others.
Also during the fiscal Q3, GreenPower reported total revenues exceeding $5.3 million. This was up more than 121% year-over-year. The company’s gross profits rose from 21.5% in Q2 to reach 27.8%. In another important metric, GreenPower reported having $28.6 million worth of inventory at the end of December. This number included $10.7 million finished vehicles as well as $17.9 million in ‘work in progress’ and ‘production supplies.’
Looking forward, GreenPower continues to develop customers and line up future business. Early in March, the company signed an agreement with Workhorse, and electric ‘last mile’ delivery vehicle provider, for a four-year commitment to build up to 1,500 EV Star cab and chassis, suitable for conversion as Class 4 commercial step vans. Production will start in July of this year. Also this month, GreenPower launched a new vehicle, a Type A school bus called the Nano BEAST, which will feature an all-electric drive with a 150 mile range per charge.
GreenPower’s recent updates have attracted notice from B. Riley analyst Christopher Southern: "In our view, Green Power appears to be on the cusp of the step-change in revenue that we have been waiting for. We continue to like Green Power's positioning in the medium- and heavy-duty vehicle market."
Southern goes on to point out the potential of the Workhorse deal, saying: “We believe the agreement makes sense for both companies, given the lack of end market overlap and chassis issues Workhorse has had... This agreement meaningfully strengthens near and mid-term deployment visibility."
These comments back up Souther’s Buy rating on GP stock, and his $15 price target suggests that it has an upside of 112% by year’s end. (To watch Souther’s track record, click here)
Overall, the Strong Buy consensus rating on GP shares is based on 4 unanimously positive analyst reviews. The company’s stock is trading for $6.88, and its $15.74 average price target represents a robust 128% one-year upside potential. (See GP stock forecast on TipRanks)
Now let’s change our focus, and turn to a high-tech battery company. EVs present a unique set of challenges for battery makers. While all cars need a battery, the demands that EVs make require a battery with far higher power and charging capacity that traditional automotive batteries – after all, it will have to store the energy to run the vehicle independently. This is where Enovix makes its entry.
Enovix is a battery company, pioneering smaller, lighter-weight batteries based on silicon anode technology, 3D architecture, and an anti-swelling constraint built-in to the design. All of this adds up to a battery cell that offers advantages in weight, safety, and energy density. Enovix’s battery technology is under development for a wide range of applications, including wearable technology, portable computers and tablets, and, at the larger end of the scale, electric vehicles.
With this stock, we move away from production companies and into the more speculative realm, as Enovix has not yet begun commercial production of its products. In a major milestone, however, the company announced on March 3 that it had begun making deliveries of qualification cells to customers from its factory. These deliveries, while not of final production designs, do demonstrate the capability of the production line, and the company’s ability to deliver working battery cells that meet customer specifications. The next step involves customer evaluation of the delivered battery cells and audits of the Enovix production lines.
5-star analyst Gus Richard of Northland Securities does not shy away from Enovix, even though the company has yet to generate revenues, and one reason is its potential for the EV market.
“We believe that ENVX's battery technology has a lot to offer auto OEMs, particularly US and European auto manufacturers. The Company has demonstrated technology and commercial validation in the consumer electronics market versus next-generation battery competitors that are still developing their technology…. We would expect ENVX to engage with one or two auto OEMs for an EV battery and would expect a partnership and more likely a licensing agreement,” Richard opined.
In line with his upbeat outlook on the company, Richard rates the stock an Outperform (i.e. Buy), and gives it a $35 price target, implying it has room to run 144% over the coming year. (To watch Richard’s track record, click here.)
Richard is bullish, but he is no outlier on this stock. Enovix has picked up 5 positive analyst reviews in recent weeks, for a unanimous Strong Buy consensus rating. The shares are selling for $14.34 and their $39.80 average price target indicates potential for ~178% upside in the next 12 months. (See ENVX stock forecast 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.