Some factors that have served as headwinds for the electric vehicle (EV) industry include economic uncertainty, inflation and supply-chain issues. However, the industry is still at an early growth stage. One segment of the industry that’s positioned for explosive growth are EV batteries. In uncertain market conditions, it’s a good time to consider exposure to some of the best battery stocks.
In terms of growth potential, the electric vehicle battery market is expected to be worth $559.87 billion by 2030. Through this period, the industry is expected to grow at a compound annual growth rate (CAGR) of 32%. Clearly, there is a big addressable market and some attractive investment options.
It’s also worth noting that the EV batteries market will likely experience growth beyond 2030. As an example, the European battery market value is expected to hit 1.7 trillion euros by 2040.
Therefore, there will be intermediate corrections, even in the best battery stocks. However, considering the demand estimates, the long-term trend for these stocks will remain positive.
Let’s talk about the seven best battery stocks to buy for the next decade. This includes some established companies along with emerging players that stand to benefit from positive tailwinds.
Best Battery Stocks: Panasonic Holdings (PCRFY)
I believe that Panasonic Holdings (OTCMKTS:PCRFY) is the best battery stock to consider. PCRFY stock has declined by 20% in the last six months. This seems like a good accumulation opportunity from a long-term perspective.
It’s worth noting that Panasonic already has a lithium-ion battery factory in the U.S. This factory is jointly operated with Tesla (NASDAQ:TSLA). Panasonic has planned another battery factory in Kansas with an investment of $4 billion. This factory will serve Tesla and other automakers.
Panasonic is also focused on cobalt-free batteries. With China controlling almost 80% of the cobalt refining industry, this move is likely to benefit U.S. electric vehicle makers.
Also, in terms of the innovation edge, Panasonic plans to increase battery density by 20% by 2030. This will boost the driving range and also allow for the creation of lighter electric vehicles.
Overall, with sustained investment in manufacturing expansion and innovation, Panasonic is likely to remain a key force in the battery industry.
BYD Company (BYDDY)
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BYD Company (OTCMKTS:BYDDY) stock is also among the best battery stocks that’s attractive at current levels. In the last six months, the stock has trended higher by 10%. I expect upside for this Warren Buffett-backed stock to continue.
As an overview, BYD Company is a vertically integrated manufacturer of electric vehicles. In June 2022, a senior executive of BYD indicated that the company will soon be supplying batteries to Tesla.
The company believes that its blade battery will redefine EV safety standards. This is likely to increase the company’s market share with several vehicle brands in discussion for “partnerships based on the technology of the blade battery.”
It’s also worth mentioning here that BYD is the leading seller of electric vehicles in China. With favorable policies, the company stands to benefit from sustained growth in vehicle deliveries.
Goldman Sachs also believes that the company’s profitability is likely to grow further in the second half of 2022. A key reason is shifting production mix to higher price models. This is another catalyst for upside in BYDDY stock.
Best Battery Stocks: Lithium Americas (LAC)
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Lithium Americas (NYSE:LAC) is an indirect way to benefit from the sustained growth in demand for batteries. As an overview, Lithium Americas is a lithium miner with assets in the U.S. and Argentina.
Estimates from McKinsey indicate that batteries will account for 95% of lithium demand by 2030. Further, lithium demand is expected to increase at a CAGR of 30% through 2030. Clearly, lithium stocks stand to benefit.
The company’s Thacker Pass project has a mine life of 46 years with a potential to deliver an average annual EBITDA of $520 million. Further, the Cauchari-Olaroz project has an average annual EBITDA potential of $308 million.
Once these projects go on-stream, Lithium Americas is positioned to deliver robust cash flows. With a strong balance sheet, financing the projects is unlikely to be a challenge. LAC stock has been sideways for the last six months. This seems like a good accumulation opportunity.
Albemarle Corporation (ALB)
Currently, 98% of lithium production is from Australia, Latin America and China. With rising demand, several countries are looking to accelerate mining of lithium assets. Also, considering the tight demand-supply scenario for the coming years, investors can consider more than one lithium stock for their portfolios.
Albemarle Corporation (NYSE:ALB) is among the top producers of lithium. ALB stock currently trades at a forward price-to-earnings (P/E) ratio of 14.2 and looks attractive for long-term exposure.
A key reason to like Albemarle is the expected growth in the lithium segment in the next few years. Through 2026, the company expects lithium net sales to increase at a CAGR of 26%.
Further, the earnings before interest, taxes, depreciation and amortization (EBITDA) margin from the segment is expected to increase from 33% in 2021 to 45% in 2026. Clearly, the segment will be the primary cash-flow generator for the company.
ALB stock also offers investors an annualized dividend of $1.58. Given the growth visibility, it’s likely that dividends will also increase on a sustained basis.
Best Battery Stocks: QuantumScape (QS)
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Among emerging players in the battery space, QuantumScape (NYSE:QS) looks interesting. QS stock has declined sharply by 48% in the last 12 months. However, the worst of the correction seems to be over, and the stock is in a consolidation mode.
As an overview, QuantumScape is in the development stage of solid-state batteries. These batteries are being touted as drivers of the next generation of electric vehicles. As an example, these potentially higher-density batteries can be charged very quickly.
Of course, production of these batteries is still few years away. QuantumScape is targeting 2025 for potential commencement of production. However, considering the deep correction in the stock, it might be a good time to accumulate.
From a financial perspective, QuantumScape expects to have a liquidity buffer of $950 million by the end of 2022. With ample liquidity buffer, the company seems to be financed through 2023. If positive developments related to the solid-state battery sustain, QS stock is likely to trend higher from current levels.
Microvast Holdings (MVST)
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Another emerging player that’s worth adding to the list of best battery stocks is Microvast Holdings (NASDAQ:MVST). In the last six months, MVST stock has declined by 63%. However, the stock is already higher from 52-week lows. The reversal rally is likely to sustain.
Microvast believes that by 2030, the demand for EV batteries is likely to increase 14-fold as compared to 2018. The company intends to capitalize on this demand growth through innovation in battery technology.
Microvast claims to have a cutting-edge cell technology. The focus is on higher energy density, lower costs, fast charging and higher battery life. The company has more than 630 patents and pending patent applications. With an innovative edge, the outlook is positive. Furthermore, with a forecasted revenue backlog of $2.5 billion through 2030, it seems that the company is positioned for stellar growth.
For 2022, Microvast expects mid-range revenue growth of 40% on a year-over-year basis. With optimism on order inflows, it’s likely that top-line growth will accelerate in the coming years.
Best Battery Stocks: Solid Power (SLDP)
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Considering the backing by some big names, I would also include Solid Power (NASDAQ:SLDP) in my list of best battery stocks. The Colorado-based startup is being backed by Ford (NYSE:F) and BMW (OTCMKTS:BMWYY).
In June 2022, it was reported that Solid Power had commenced pilot manufacturing of solid-state batteries. If the progress is smooth, mass production of batteries will begin in 2024.
It’s worth noting that Solid Power will be supplying batteries to Ford and BMW. The revenue visibility is therefore secure once mass production begins.
Additionally, with the backing of two automotive giants, Solid Power is unlikely to face any financial hurdles. Significant scaling-up of operations is in the cards if pilot testing is successful.
SLDP stock has largely traded flat in the last six months. I expect the stock to surge higher once the results from the pilot tests are public.
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.
Faisal Humayun is a senior research analyst with 12 years of industry experience in the field of credit research, equity research and financial modeling. Faisal has authored over 1,500 stock specific articles with focus on the technology, energy and commodities sector.