The fundamentals are now forming for these future potential winners
- The Electric Vehicle is mounting a serious challenge, and below are EV stocks that are analysts’ BUY favorites
- Tesla (TSLA): Any list of electric vehicle stocks needs to include the king of EVs.
- Lucid (LCID): Lucid is the top dog in range and a fan favorite.
- Rivian (RIVN): This EV maker has a strong backbone from high-profile investors.
- General Motors (GM): This legacy auto maker boasts strong management that’s keeping up with changes.
- Ford (F): This company can also do well, but may suffer short-term as it adjusts its product lineup.
- Nio (NIO): It has the proven results to punch its ticket to the list of EV stocks to buy.
- XPeng (XPEV): Its growth is impressive, and it’s still a relative bargain.
The internal combustion engine (ICE) is the king of the hill, but electric vehicles have stepped up as a legitimate challenger. As such, there are EV stocks to buy that have a consensus buy analyst ratings. Normally I am not one to chase those opinions, but in this case, it works. This is a relatively new field, so we need all the help we can get.
While the actual price targets still seem arbitrary, the general scenarios make sense. Some EV’s have no chance, but with others, it’s only a matter of time until they gain traction. Success has already come to a few newcomers, while the old dogs are learning new tricks. Many legacy car makers have also pivoted into this new direction.
The market is still emerging but that’s where the potential lies.
I worry about how we are going to sustainably supply batteries for 100 million new vehicles per year. That potential wrinkle in the electric vehicle story casts a doubt over EV stocks. The analysts, however, are confident with their conviction. They label most popular EV stock with buy ratings.
Nevertheless, there is a large discrepancy between their price target and current price. This is a potential source of headache for investors.
That’s because unless prices rebound on some of these stocks, the analysts are likely to adjust their prices down. Those downgrade headlines can hurt the stocks. While this doesn’t change the prospects of the company, it does temporarily hurt the investors. Wall Street has been more fickle lately, and EV stocks are especially susceptible to these mood swings.
But over the long term, these EV stocks look like the pick of the litter.
Depending on which rankings you use, Tesla (NASDAQ:TSLA) is either a buy or a strong buy. It would be a travesty to omit it from our list of EV stocks. Tesla is, after all, the king of electric vehicle stocks. It started this revolution. EV’s have existed since the 1880’s, but not until Tesla did the technology have a real chance at ubiquity.
Besides, under the leadership of CEO Elon Musk, TSLA stock overcame impossible obstacles. Financially it came close to the brink about three years ago, but it’s still kicking. The Tesla team surprised Wall Street with its success.
Critics have lost most of their talking points. But Musk’s recent public spats are reopening old wounds. In addition, TSLA stock has suffered a bit from his ties to the buyout offer of Twitter (NYSE:TWTR). TSLA should have support this week, but also resistance above. If the buyers are able to break through $796, they can rally more than $100 points.
Many experts deemed Lucid (NASDAQ:LCID) as the Tesla killer. I take offense to that from a business sense, because it has a long way to go. Operationally they are not in the same league. But Lucid’s car is an outstanding challenger to what Tesla has to offer. The car is beautiful and packs a wallop of tech.
However, I don’t measure success just in miles range on a single charge. I prefer to see financial results before committing risk. LCID stock still falls short on that front because it is not yet in mass market mode. I fear that the next earnings report or milestone update will have another production delay. I don’t envy management because they are trying to launch during a technological crimp.
The global chip shortages are undoubtedly contributing to the scaling back. Nevertheless, investors are not usually too patient. They will look elsewhere if management doesn’t step up. Luckily the LCID fans have strong conviction. But I bet they have a limit, so they expect some good news. Otherwise they may throw a fit.
Technically there is support above $17 and resistance above $20 per share. If the bulls overcome $21, they can overshoot 20%.
Another U.S. electric vehicle contender is also a relative newcomer. Rivian (NASDAQ:RIVN) stock’s performance does not inspire confidence. It is down over 70% year-to-date, but the indices are also down, so this drop isn’t entirely its fault. Nevertheless, the proof is in the pudding for RIVN. Onus is on management to live up to the hype.
I am optimistic for them because of Amazon (NASDAQ:AMZN)’s involvement. The ecommerce and cloud giant is part owner and also perhaps a buyer of their work vans. I doubt that Rivian will need help with sales though, because the trucks are slick. Rivian will likely sell out of whatever they they make. The price tag might be an issue if indeed the U.S. is going into a recession. But that’s a problem that most of our EV stocks will have to face.
Fundamentally, there isn’t much to judge, and the stock is not much help either. The bulls have an opportunity if they can beat $35 per share. But first they must hold support and the higher-low trend they started on Rivian’s last earnings report. Until then, consider RIVN a speculative EV stock.
General Motors (GM)
Consensus is that General Motors (NYSE:GM) has excellent management, and they’ve been through rough waters. They have therefore earned the right of investor confidence. By definition investors want to be long the stock, so it is usually a matter of levels. Besides, GM has been trying to crack into the alt-fuel race for a while. So they’ve had a few practical lessons I bet.
Technically, the GM stock chart is in the same boat as the others. The bears have controlled the action for months. Of late, they are attempting to make a stance above $34 per share. If they are successful, GM stock can rally over 20% and retest $46 per share. There will be heavy selling pressure if that happens, but investors should enjoy easy profits in that scenario.
In the long run, GM stock should gain strength with the general market. Looking at its financial metrics, like the price-to-earnings ratio, GM trades at a fraction of the newcomers. Eventually, when the whole electric vehicle sector matures, that discrepancy will normalize.
This is years away though, so for now we should remain vigilant tracking short-term opportunities.
Ford (NYSE:F) is another legacy U.S. auto maker, which I have traded in the past. But I’ve never done so when the stock is rallying out of control. Recently it has corrected a bit, but it is not low enough for a slam-dunk win now. However, this is a long-term assessment of electric vehicle stocks that have buy recommendations from analysts. Ford is one that has a legitimate chance at success.
I fear that it is likely to struggle a lot in the beginning. The margins will likely suffer during the sales mix shift. This is similar to what GM has to go through, but it seems more prominent in Ford.
I live in EV land in Southern California, yet I still don’t see too many Fords. This could be a sourcing issue, but I reserve the right to be cautious.
Investors in Ford stock would do well to only take partial positions right now. This way they can add later at lower prices, should the opportunity arise. That’s a simple way to hedge the risk and insure a reasonable overall cost basis position. Technically, $14 then $15 are easy, short-term pivotal zones. This means that there will be sellers lurking there.
The resistance is not insurmountable, but it is still a tough test.
Nio (NYSE:NIO) reports earnings this week, so the short-term risk level is very high. The short-term reactions to those headlines have been violent and unpredictable. I caution investors about being too directional or going all in. The emotional response is not usually about the quality of the report. Bulls and bears are almost at equal footing overnight.
There is also the matter of the threat of de-listing. Nio is potentially going to suffer the same disruptions as Didi (NYSE:DIDI). Add to this the complications from the recent lockdowns in China and it could be a hot mess.
But aside from these extrinsic risks, Nio is growing fast. Revenues have more than doubled since 2020, and they have a positive cash flow from operations. They still lose money but at least they are burning cash they is mostly organic.
The bears are in control of the price action in NIO. This EV stock needs to get above $20 and hold that level. The bulls must show the willingness to roll with the punches, or else NIO will likely retest $15 per share.
The zone below that looks tough, as it has survived pretty harsh conditions. This is a bankable support zone for the near future. What ever the scenario, I would only consider partial positions in it.
This last of our electric vehicle stocks with a buy rating is another Chinese manufacturer. XPeng (NYSE:XPEV) stock hardly has any negative analyst marks. This is hard to believe since it is down almost 50% year-to-date. Nevertheless, it has the financial metrics to back their confidence claims. Revenues quadrupled in under two years, without building bloat in valuation.
The company still loses money but it is not hemorrhaging it. In addition its price-to-sales is a modest 6x, which is just a bit higher than Nio. Like Nio, it too suffers from Chinese headline risks from lock downs to delisting.
XPEV stock will likely move in sympathy to Nio’s earnings report this week. As long as it can hold support near $18, it can then focus on tackling resistance above. There are likely sellers lurking in size near $28 then $32 per share. While these won’t be insurmountable, they present a serious challenge for now. Recent support has been in contention since fall of 2020.
This post originally appeared at InvestorPlace.
On the date of publication, Nicolas Chahine 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.