Steer Clear of Outrageously Valued VinFast Stock. 3 EV Stocks to Buy Instead.
VinFast Auto (NASDAQ:VFS) went public through a blank-check merger early in August. By August 28, the Vietnam-based electric vehicle (EV) manufacturer had a market capitalization of $190 billion, making VinFast stock the third most valuable automaker behind Tesla (NASDAQ:TSLA) and Toyota Motor (NYSE:TM).
Bloomberg contributor Chris Bryan believes the $190 million market cap achieved on August 28 will be far less a few months from now.
For those who don’t want to take a chance on the EV division of Vietnam’s wealthiest person, Pham Nhat Vuong, who owns almost all of VinFast’s stock, I’m more than confident I can find three alternatives whose combined market caps add up to $190 billion.
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I’ll even make it tougher on myself by saying the three names must be from three different sectors and have been public companies for at least five years.
Without further delay, here are my three alternatives to VinFast stock. I like your chances of outperforming the Vietnam EV maker in the long haul.
S&P Global (SPGI)
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S&P Global (NYSE:SPGI) represents the financial sector. It is the largest of the three alternatives, with a market cap of $125.5 billion. That leaves me with $64.5 billion for the remaining two.
I’ve recommended the parent of the S&P 500 on several occasions in recent years. My latest was in July. I included SPGI with two other stocks rated highly by analysts. In SPGI’s case, 22 out of 24 analysts rated it Overweight or an outright Buy, with a target price of $440.71. It’s tumbled about 7% since my article.
I have the utmost faith in Doug Peterson, who’s helmed the company for nearly a decade, delivering index-beating returns by constantly focusing on getting better. Right now, Peterson’s working on getting it more profitable.
The company reported Q2 2023 results a week after my article in July. The results were reasonably good, with adjusted net revenue growth of 7% and adjusted earnings per share of $3.12, 11% higher than a year ago. As a result, it reiterated guidance for 2023 of 4% to 6% adjusted revenue growth and $12.45 earnings per share (EPS) at the midpoint of its outlook.
The latest data shows 23 analysts covering its stock, with 21 rating it Overweight or Buy with a target price of $450.50, about $10 higher than in July.
Its shares are up 17.4% year-to-date (YTD), almost identical to the index.
Chipotle Mexican Grill (CMG)
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Chipotle Mexican Grill (NYSE:CMG) has a $53.9 billion market cap, leaving me with $10.6 billion for my final pick.
CMG stock has had an interesting year in 2023 so far. While it’s up more than 42% YTD, it spent May through July going sideways at around $2,050. Like most stocks, it had a correction in August, falling 1.8%.
Baird analyst David Tarantino wrote in a note to clients on Sept. 5 saying the company could raise prices in 2024 to increase its profit margins in the year ahead. In addition, the analyst believes strong same-store traffic momentum combined with these price increases will lead to higher EPS estimates and valuation multiples in the next year.
Tarantino’s got a $2,400 price target on CMG. The median target of the 34 analysts covering it is $2,200. Tarantino’s target price isn’t the highest. That’s $2,570, 31.7% higher than where it’s currently trading.
Chipotle remains a big holding of Bill Ackman’s hedge fund, Pershing Square Capital Management L.P. It owns 953,608 company shares, accounting for nearly 19% of its holdings. Ackman paid approximately $436 on average for its shares.
Charles River Laboratories (CRL)
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Charles River Laboratories (NYSE:CRL) has a market cap of $10.5 billion, putting me within $100 million of a $190 billion combined market cap.
The company, which provides pharmaceutical and biotech companies with products and services to accelerate research and drug development efforts, is having an excellent year.
In Q2 2023, it reported quarterly revenue of $1.06 billion, 8.9% higher than a year earlier. On an organic basis, excluding one-time items and acquisitions or divestitures, sales rose 11.2%. As a result of the healthy sales, it upped its guidance for revenue growth to 3.5% at the midpoint, 25 basis points higher than its previous guidance.
In terms of profits, its adjusted operating income in the second quarter was $216.2 million, 2.1% higher than a year earlier. It’s not spectacular growth, so its shares are down more than 6% in 2023. However, this year, it expects to earn $10.60 a share at the midpoint of its updated guidance, 20 cents higher than its previous guidance.
Based on 51.5 million shares outstanding, that’s an additional $10.3 million to the bottom line. Every little bit counts.
Of the 16 covering its stock, 13 rate it Overweight or a Buy, with a target price of $250, 22% higher than its current share price.
Slow but steady wins the race.
On the date of publication, Will Ashworth 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.
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.
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