BYD Co. is Friday's IBD Stock Of The Day with the Chinese electric-vehicle and battery giant enjoying booming growth as it sets its sights on overtaking Tesla at the top of the EV sector. BYD stock is close to record highs, forging a new buy point.
BYDDF, which was founded in 1995, is one of the world's top EV producers. The company makes electric cars and buses along with a line of hybrids. BYD is also a major EV battery manufacturer and benefited from its in-house production of chips and batteries during China's coronavirus lockdowns and throughout the supply-chain crisis.
Warren Buffett's Berkshire Hathaway has also bet big on BYDDF, owning more than 20% of the company, according to FactSet.
BYD earnings declined in 2021 with more capital expenditures compared the previous three years combined. However, that spending spree appears to be paying off in 2022.
BYD has reported strong growth in 2022, posting record sales in May of 114,943 vehicles, up 250% vs. a year earlier. Previously, the company announced its first-quarter net income jumped 241% in local currency terms compared to a year earlier. Revenue also rose 63%.
BYYDF And TSLA
BYD reportedly will soon start supplying batteries to Tesla. A top executive told state-owned media recently that it would begin to provide batteries for Elon Musk's EV giant, though Tesla has yet to confirm any such deal.
BYD will be releasing several new models in the next few months. That includes the Seal sedan, with essentially the same dimensions and range as a Tesla Model 3 but for $10,000 less. Seal deliveries should begin in July or August. BYD also will begin selling EVs in Australia in the third quarter.
On top of possibly supplying parts for Tesla, the China EV manufacturer is overtaking Tesla for overall sales in the second quarter. BYD is on pace to easily top its first-quarter sales of 286,329 EV and hybrid vehicles.
Tesla reported first-quarter worldwide deliveries of 310,048. But Tesla's Shanghai factory was shut down for much of April and didn't resume full production until early June. That will likely reduce Q2 deliveries by more than 50,000 units.
BYD Stock
BYD closed 4% higher at 37.45 in Friday's market trading. It currently has a 41.34 buy point from a deep cup base. After Friday, it will have a handle on a weekly chart and a 39.81 buy point, but the stock needs a few more days for that handle to appear on daily charts, according to MarketSmith analysis.
Ideally, BYD stock would form a long handle, perhaps long enough to qualify as its own base. That would offset concerns about the 48%-deep consolidation, while letting its major averages catch up.
But China EV stocks — and U.S.-listed Chinese stocks generally — are rebounding amid the general market weakness. Nio, Xpeng and Li Auto have been running up, with Li Auto getting close to highs.
Trading volume for BYDDF appears light, because BYD is not listed in the U.S., trading over the counter. However, the company is listed on both the Shenzhen and Hong Kong stock exchanges. So actual volume worldwide is not a concern.
Institutions own more than 27% of BYD. As of March, 2022, 1,240 funds owned BYDDF shares, a decrease of 34 since the end of 2021, according to MarketSmith.
BYD does not have a Composite Rating, a key IBD benchmark. But it has a 96 Relative Strength Rating, an exclusive IBD Stock Checkup measurement for share price movement with a top grade of 99. The rating shows how a stock's performance over the last 52 weeks holds up against all the other stocks in IBD's database. The EPS rating is a so-so 56, but should improve in coming quarters.
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