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The equity markets have taken a hit since the start of 2022 due to various macroeconomic challenges, ranging from supply chain disruptions and geopolitical tensions to interest rate hikes and inflation.
Growth stocks across most sectors have been hammered as investors are wary about a deceleration of revenue and earnings, the threat of an upcoming recession, and the lofty valuations surrounding these companies.
However, the electric vehicle or EV market is rapidly expanding, making it attractive for growth investors. In 2022, EVs accounted for 10% of total auto sales globally and in China, the world’s largest EV market, this figure was much higher at 19%.
A report from Statista estimates battery-powered vehicle sales to touch 16.2 million units in 2027, up from 7.13 million units in 2022, providing enough room for EV companies to grow their top line and profit margins in the upcoming decade.
Considering these factors, here are the three top electric vehicle stocks you can buy, according to Wall Street consensus estimates.
Nio Inc
Down 85% from all-time highs, and 58% in the past year (see chart below), Nio (NIO) is currently valued at a market cap of $15.35 billion. One of the largest EV companies in China, Nio has trailed the broader markets in recent years due to the country’s zero COVID-19 policy which resulted in supply chain constraints, negatively impacting the company’s ability to scale its production capabilities.
But in 2022, China relaxed lockdown measures and reopened its economy, allowing Nio to ramp up production in the last nine months. It now aims to deliver 250,000 EVs in 2023, the bulk of which will be manufactured and shipped in the second half of this year.
While still unprofitable, Nio has increased its sales from $2.5 billion in 2020 to $7.1 billion in 2022. So, NIO stock is priced at two times trailing sales which is quite reasonable for a growth stock.
The China-based EV giant continues to expand its portfolio of vehicles, and the two sedans launched last year now account for more than 50% of total deliveries. Moreover, Nio’s BaaS (battery-as-a-service) business, established in late 2020, is another revenue driver for the company. This subscription model allows buyers to swap and upgrade batteries, resulting in high-margin recurring sales for Nio.
Nio expects to end 2023 with monthly deliveries of 30,000 vehicles. Comparatively, it forecasts to deliver around 33,000 vehicles in Q1 of 2023. Analysts tracking Nio stock remain bullish and expect shares to gain 83% in the next 12 months.
Wall Street analysts are bullish on Nio and the stock has a Mean Target of $17.29, which is 87.9% from where it's currently trading:
Li Auto Inc
Another EV heavyweight from China, Li Auto (LI), is valued at a market cap of $25.79 billion. In Q4 of 2022, its vehicle sales were up 66.4% yearly at $2.5 billion. But a difficult pricing environment meant it ended Q4 with a gross margin of 20.2%, a decline of 220 basis points compared to the year-ago period.
Analysts on Wall Street are very bullish on Li Auto, and the Mean Target for the stock is $37.98, which is 53.4% higher than where it is currently trading:
Li Auto began manufacturing EVs in November 2019 and has since delivered over 250,000 vehicles. Its deliveries rose to 133,246 units in 2022, up from 90,491 units in 2021, which is quite impressive for such a young company. Tesla, the largest EV manufacturer in the world, delivered less than 125,000 vehicles in its first three years of production.
Analysts expect Li Auto to increase revenue by 106% to $13.6 billion in 2023 and 48% to $20 billion in 2024. While most EV companies report massive losses, Li Auto is forecast to end 2024 with adjusted earnings of $1.02 per share, compared to a loss of $0.3 per share in 2022.
So, Li Auto stock is priced at 1.2 times 2024 sales and 24 times forward earnings, which is very cheap. Due to its stellar revenue growth and widening profit margins, analysts expect Li Auto stock to surge another 60% in the next year.
Li Auto began manufacturing EVs in November 2019 and has since delivered over 250,000 vehicles. Its deliveries rose to 133,246 units in 2022, up from 90,491 units in 2021, which is quite impressive for such a young company. Tesla, the largest EV manufacturer in the world, delivered less than 125,000 vehicles in its first three years of production.
Analysts expect Li Auto to increase revenue by 106% to $13.6 billion in 2023 and 48% to $20 billion in 2024. While most EV companies report massive losses, Li Auto is forecast to end 2024 with adjusted earnings of $1.02 per share, compared to a loss of $0.3 per share in 2022.
So, Li Auto stock is priced at 1.2 times 2024 sales and 24 times forward earnings, which is very cheap. Due to its stellar revenue growth and widening profit margins, analysts expect Li Auto stock to surge another 60% in the next year.
Plug Power
Plug Power (PLUG), valued at $6.1 billion by market cap, provides hydrogen fuel cell (HFC) turnkey solutions to power electric motors. It created the first commercially viable market for HFC technology, deploying more than 60,000 fuel cell systems for e-mobility.
Plug Power is the largest buyer of liquid hydrogen and has already built a hydrogen refueling network across North America with nearly 200 fueling stations. The company expects to generate 500 tons of green hydrogen daily by 2025. In 2022, it produced just 9.1 tons of green hydrogen each day.
Wall Street analysts expect Plug Power to increase sales from $700 million in 2022 to $2.1 billion in 2024. Its adjusted loss per share is forecast to narrow from $1.25 to $0.17 in this period.
In its investor presentation, Plug Power stated it estimates sales to touch $5 billion in 2025 with an operating margin of 17%. Additionally, total revenue might surge to $20 billion in 2030 with an operating margin of 20%.
According to Wall Street analysts, Plug Power's Mean Target is $25.64, which is 145% from where the stock is currently trading:
The key takeaway
The global shift towards EV adoption is gaining momentum. Wall Street analysts are bullish on Nio, Li Auto, and Plug Power due to their lower valuation. These three stocks look to be well-positioned to deliver market-beating gains, especially if investor sentiment improves.
On the date of publication, Aditya Raghunath did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
