Sector Standouts: 3 EV Stocks That Wall Street Loves
EV stocks have witnessed a price correction in recent months. Sluggish sales have forced automakers to cut production or pivot back to hybrid vehicles. Inflationary pressures and supply chain headwinds, coupled with a tough macroeconomic backdrop, have prevented EV companies from meeting previously set targets. Consequently, Tesla (NASDAQ:TSLA), the darling among EV stocks, has declined more than 20% year-to-date (YTD), compared to a 5% increase in the S&P 500 index during the same period.
Yet a recent report highlights EV sales could account for 35% of all global new car sales by 2030. With that information, here are three EV stocks that could gain significant traction in 2024.
Global X Autonomous & Electric Vehicles ETF (DRIV)
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We start our discussion with an exchange-traded fund (ETF) that gives brad exposure to EV stocks. Holdings of the Global X Autonomous & Electric Vehicles ETF (NASDAQ:DRIV) include not only EV manufacturers but also critical components like autonomous vehicle technology, lithium batteries, and key materials.
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DRIV currently has 75 holdings. The leading sectors in the fund include consumer discretionary (37.5%), information technology (29.1%), industrials (16%), and materials (12.2%). United States-based companies top the list (55.7%) followed by Japan (10.9%) and South Korea (5.3%).
The fund not only offers access to EV stocks but also to prominent tech stocks across multiple sectors and industries. In fact, the leading names on the roster include Nvidia (NASDAQ:NVDA), Toyota (NYSE:TM), Microsoft (NASDAQ:MSFT), Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL), and Apple (NASDAQ:AAPL). This highlights a rotation towards tech stocks due to near-term cyclical headwinds in the EV space.
Among car manufacturers in the ETF are Tesla, General Motors (NYSE:GM), Honda Motor (NYSE:HMC) and Ford Motor (NYSE:F). The fund has declined more than 3% YTD and is currently trading 25% below than its record high in late 2021. We should also note that the annual expense ratio for DRIV is 0.68% per year or $68 on a $10,000 investment.
Li Auto (LI)
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Li Auto (NASDAQ:LI) has emerged as a leading player among China’s EV stocks, strategically targeting both hybrid and premium segments. By offering hybrid engines, the company addresses range anxiety, enabling potential customers to confidently to travel long distances across China.
The company reported robust third-quarter results that surpassed revenue projections which came in at $4.75 billion, up 271% year-over-year (YoY). Vehicle orders surged to a record high of 50.000 in December. Net income also saw a significant improvement.
Management set an ambitious target of delivering 800,000 vehicles in 2024. The company will also launch its first EV multipurpose vehicle, the “Li Mega,” hoping it will become the best-selling Chinese EV in the premium category.
LI stock has fallen more than 7% YTD. Shares are trading 30% lower from its high in August, due to weak market sentiment for Chinese stocks. The 12-month median price forecast for LI stock stands at $50.38, indicating a 50% upside potential.
ON Semiconductor (ON)
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ON Semiconductor (NASDAQ:ON) is a leading provider of power and analog semiconductors and sensors. Automotive and industrial market segments accounted for roughly 80% of its revenue in 2023.
Management reported fourth-quarter and full year 2023 earnings in early February. Fourth-quarter revenue came in at $2.02 billion, declining 1% YOY and reflecting broad weakness across all end markets. GAAP earnings per share declined 4% YOY to $1.28.
Despite near-term cyclical challenges, the full year 2023 record automotive revenue increased 29% YOY. ON Semiconductor has outperformed its peers, reaching a 25% market share in SiC chips, a key ingredient for powering EVs. At full capacity, its new SiC production facility in South Korea, boasts a production potential exceeding 1 million wafers per year.
ON stock has lost 6% YTD while shares are trading at a valuation of 18.7 times forward earnings and 4.3 times trailing sales. The 12-month median price forecast for ON stock stands at $90.00 , signaling roughly a 16% upside.
On the date of publication, Tezcan Gecgil did not have (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.
Tezcan Gecgil, PhD, began contributing to InvestorPlace in 2018. She brings over 20 years of experience in the U.S. and U.K. and has also completed all 3 levels of the Chartered Market Technician (CMT) examination. Publicly, she has contributed to investing.com and the U.K. website of The Motley Fool.
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