EV stocks have multiplied in Tesla‘s (TSLA) wake and as electric cars look to go mainstream — but not all are created equal. Some car stocks are more ready than others for an EV future. Here are the top-rated electric-vehicle makers and EV plays.
- Li Auto
- Global X Lithium and Battery Tech ETF
Are Electric-Vehicle Stocks A Good Buy?
Companies with two important characteristics generally make the best candidates for stocks to buy and watch, according to CAN SLIM guidelines. First, they need a strong track record of earnings growth. Second, the stock should be showing elements of market outperformance, and be shaping bullish chart patterns.
But most of the new EV stocks have neither. They include Fisker (FSR), Canoo (GOEV), Faraday Future (FFIE), Lordstown (RIDE) and Xos (XOS). In fact, many of these EV startups aren’t producing or delivering electric vehicles yet.
However, two startups have begun selling their first electric vehicles, bringing in revenue. Lucid Motors (LCID) began deliveries of the Lucid Air, a luxury electric sedan, last October. Rivian Automotive (RIVN) also began delivering the R1T, an electric pickup, in late 2021, with the R1S SUV due this year.
Meanwhile, Chinese EV stocks like Nio (NIO), Xpeng (XPEV) and Li Auto (LI) sell tens of thousands of vehicles, but remain unprofitable for now. Then there are legacy auto giants like General Motors (GM), Ford (F) and China’s BYD Co. (BYDDF) that are transforming into electric-vehicle powerhouses.
Electric Car Stocks Include Battery Stocks, Charging Stocks
The growing universe of EV stocks doesn’t end with carmakers. A constellation of other companies provide car batteries, car charging stations, electric motors and other EV-associated products. Among them are EV charging networks ChargePoint (CHPT), EVgo (EVGO), Blink Charging (BLNK) and Wallbox (WBX).
Hyliion (HYLN) is developing electric powertrains for big-rig trucks as well as powertrains that can be compatible with renewable natural gas and hydrogen fuel cells.
Romeo Power (RMO) makes battery packs for commercial EV fleets. QuantumScape (QS) touts a major breakthrough in solid-state lithium metal batteries. And Global X Lithium and Battery Technology ETF (LIT) holds a basket of stocks, from lithium miners to battery producers, poised to benefit from the rise of electric vehicles.
Magna (MGA) supplies battery enclosures and e-drive gearboxes to the likes of GM, Nio and Xpeng. The company also will make the Fisker Ocean SUV, likely to arrive by year end.
Best EV Stocks To Buy Or Watch
The charts of most EV stocks are under fresh strain after severe damage in the past year. Broadly, both established automakers and startups are a speculative bet on electric vehicles, itself seen as a nascent field. They have suffered as a risk-off sentiment prevails in the current market, and as shortages of key components drag on.
The electric-car stocks below have the best mix of fundamentals and technicals.
Tesla: Growing EV Sales
Tesla stock, the top auto and EV stock by market capitalization, has an IBD Composite Rating of 70 and an EPS Rating of 80. Shares remain below a falling 10-week moving average, amid multiple challenges. The relative strength line for TSLA stock is near 2022 lows but shows a big, long-term uptrend.
Tesla expects to grow vehicle deliveries 50% annually. In 2021, Tesla grew deliveries 87% to 936,172 vehicles. The Model S Plaid is Telsa’s fastest car yet, going from zero to 60 miles per hour in less than two seconds. Tesla’s upcoming Cybertruck made a cameo at an event in Texas on April 7, though it won’t enter production until at least 2023.
Tesla’s China EV sales rebounded in May vs. April, when the Shanghai plant was shut down due to Covid lockdowns. Tesla will reportedly suspend its Shanghai factory again in July, but for necessary upgrades this time.
Huge Growth For BYD
BYD (BYDDF) has no Composite Rating and an EPS Rating of 56. BYDDF stock tried to clear a 41.34 buy point from a cup base June 24, but closed below the entry. The relative strength line is just below highs on various factors, including robust EV sales and plans to supply Tesla with EV batteries. China’s BYD is Hong Kong-listed, trading over the counter in the U.S.
Chinese car and battery giant BYD has shifted entirely to battery electric vehicles (BEVs) and plug-in hybrid electric vehicles (PHEVs). BYD reportedly grew EV sales 250% in May, defying Covid-19 lockdowns. It more than tripled EV sales in 2021, and may do so again in 2022. Backed by Warren Buffett’s Berkshire Hathaway (BRKB), BYD sells the Tang electric SUV in Norway. It will likely increase exports in the second half of 2022, with Europe and Australia among the key markets.
A major EV battery maker and supplier, BYD also makes its own chips, which allowed rapid expansion in 2021 and so far this year.
LI Stock Eyes Buy Point, New EV Looms
Li Auto stock has a Comp Rating of 96 and an EPS Rating of 76. An IBD 50 top growth stock, Li Auto topped a 37.55 buy point June 23, following a six-week win streak. LI stock’s 63% rally in June to date has helped it regain key moving averages following a recent slump.
Delisting fears and supply disruptions have weighed on China EV stocks, among other factors. Like most China-based stocks, Li Auto trades in American depositary receipts.
The China EV startup sells the Li One SUV. The Li One is a hybrid EV, with a small gasoline engine to extend its range. After a delay due to China’s Covid shutdowns, the L9 SUV, Li Auto’s second model, launched June 21.
Li Auto’s EV sales rebounded 176% in May vs. April. In 2021, Li nearly tripled EV sales. Revenue’s growing at a triple-digit pace, though consistent profits are a ways off.
Lithium ETF Holds Tesla, BYD
The Global X Lithium and Battery Technology ETF rallied sharply for most of 2020 and 2021. The ETF fell sharply from a November peak. After a rally off late-April lows, LIT is back above the 10-week average. It has a Relative Strength Rating of 77 out of a possible 99. That means it has outperformed 77% of all stocks in IBD’s database during the past year.
The largest holdings in the lithium stock ETF include Albemarle (ALB), as well as Tesla and China’s BYD. The LIT fund also invests in miners and refiners of lithium, as well as battery producers. Most of today’s EVs use lithium-ion and lithium iron phosphate (LFP) batteries.
Albemarle: Lithium For EV Batteries
ALB stock carries an 89 Composite score and a 71 EPS Rating. Albemarle stock is working on a cup-with-handle buy point at 273.78, but it’s 18% below the entry for now. It sits just below key moving averages but the relative strength line remains not far from highs.
Albemarle, one of the world’s largest lithium miners, expects to benefit from higher lithium prices, as demand outstrips supplies. It’s one of the largest providers of lithium for EV batteries. It’s also said to own some of the purest lithium mines in the world. The Charlotte, N.C.-based company is expanding capacity. In May, Albemarle twice raised full-year earnings guidance.
In the near term, EV stocks will continue to face chip constraints but those are starting to lessen. Battery costs and shortages could be an issue in the midterm, as supplies of lithium and other raw materials struggle to keep up with demand. Longer term, more government support is likely headed for electric vehicles, while greater EV production should help bring down vehicle prices.
Find Aparna Narayanan on Twitter at @IBD_Aparna.
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