Electric Vehicles (EVs) are experiencing a surge in popularity owing to their efficient performance and environmentally friendly characteristics. Advanced features, including extended battery range and rapid charging, are further fueling market expansion.
Considering this, it seems prudent to acquire shares of robust EV stock Hyundai Motor Company (HYMTF), while Toyota Motor Corporation (TM) may be held for the time being. However, it seems wise to steer clear of Electrameccanica Vehicles Corp. (SOLO) owing to its weak fundamentals at present.
Prior to exploring these stocks, let's assess the dynamics of the EV industry.
Electric vehicles have surged in popularity, surpassing conventional Internal Combustion Engine (ICE) vehicles due to superior energy conversion efficiency, offering a silent, responsive driving experience and boasting lower operating costs with minimal emissions.
Furthermore, advanced features such as extended battery range, rapid charging, and Artificial Intelligence (AI) integration have fueled recent EV sales growth, propelling the global market forward. Moreover, manufacturers are prioritizing enhanced features to meet escalating consumer demands.
That being said, last year marked a significant milestone for EVs globally, with U.S. EV sales exceeding 1 million, reflecting a robust 50.7% year-over-year growth. Despite recent production slowdowns, the market remains resilient, indicating maturity and sustainability.
BloombergNEF forecasts a 21% increase in global passenger EV sales in 2024, totaling 16.7 million units, with 70% being fully electric. The EV's share of global vehicle sales is expected to reach around 20%, with pure-electric vehicles accounting for 14%, up from approximately 17% in 2023.
Meanwhile, Statista projects the global EV market to reach an astounding $623.30 billion in revenue this year, with steady annual growth anticipated to hit $906.70 billion by 2028. In light of these trends, let’s look at the fundamentals of the three prominent EV stocks.
Stock to Buy:
Hyundai Motor Company (HYMTF)
Based in Seoul, South Korea, HYMTF manufactures and distributes motor vehicles and parts. It provides trucks, buses, vans, and engines, along with vehicle financing, credit card processing, and diverse financial services, alongside train manufacturing and other activities. The company's segments include Vehicle; Finance; and Others.
The stock’s trailing-12-month net income margin of 7.17% is 52.5% higher than the industry average of 4.70%. Its trailing-12-month CAPEX/Sales of 3.66% is 18.9% higher than the 3.07% industry average. Also, the stock’s trailing-12-month cash from operations of $2.35 billion compares with the $265.80 million industry average.
For the fiscal 2023 fourth quarter, HYMTF’s revenue increased 8.3% year-over-year to KRW 41.67 trillion ($31.35 billion). Its income before tax grew 4.9% from the year-ago value to KRW 3.26 trillion ($2.45 billion). Furthermore, net income (continuing) rose 29.1% from the prior year’s period to KRW 2.66 trillion ($2 billion).
Analysts expect HYMTF’s revenue to increase 2.5% year-over-year to $124.88 billion for the fiscal year ending December 2024. Similarly, the company’s revenue for the next fiscal year ending December 2025 is expected to grow 3.6% from the previous year to $129.37 billion. Also, the company topped the consensus revenue estimates in all four trailing quarters.
HYMTF has gained 24.2% over the past six months and 40% over the past year to close the last trading session at $49.36.
HYMTF’s solid outlook is reflected in its POWR Ratings. The stock has an overall rating of B, which translates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
HYMTF has an A grade for Stability and a B for Growth and Value. It is ranked #13 out of 53 stocks within the Auto & Vehicle Manufacturers industry.
In addition to the POWR Ratings I’ve highlighted, you can see HYMTF’s Momentum, Sentiment, and Quality ratings here.
Stock to Hold:
Toyota Motor Corporation (TM)
Headquartered in Toyota, Japan, TM designs, manufactures, assembles, and sells passenger vehicles, minivans, and commercial vehicles, along with related parts and accessories. The company operates across Automotive; Financial Services; and All Other segments.
TM’s trailing-12-month EBITDA margin of 14.06% is 29.3% higher than the industry average of 10.87%. However, the stock’s trailing-12-month gross profit margin and asset turnover ratio of 19.14% and 0.52x are 46.4% and 46.8% lower than the industry averages of 35.69% and 0.98x, respectively.
For the fiscal 2024 third quarter that ended December 31, 2023, TM’s total sales revenues increased 23.4% year-over-year to ¥12.04 trillion ($81.16 billion). Its operating income rose 75.7% from the year-ago value to ¥1.68 trillion ($11.33 billion).
Furthermore, the company’s net income grew 85.9% year-over-year to ¥1.38 trillion ($9.33 billion), while EPS attributable to TM came in at ¥100.62, reflecting an 88.4% improvement from the previous year’s quarter.
The consensus revenue estimate of $68.22 billion for the fiscal 2024 fourth quarter ending March 2024 indicates a 5.4% year-over-year decrease. However, the consensus revenue estimate of $75.63 billion for the fiscal 2025 first quarter ending June 2024 reflects a 2.8% year-over-year increase.
Over the past year, the stock has gained 52.2%, closing the last trading session at $218.86.
TM’s fundamentals are apparent in its POWR Ratings. The stock has an overall rating of C, which equates to Neutral in our proprietary rating system.
TM has a B grade for Stability and a C grade for Growth. Also, it has a D grade for Momentum. The stock is ranked #27 out of 53 stocks within the Auto & Vehicle Manufacturers industry.
Click here to access additional TM ratings for Value, Sentiment, and Quality.
Stock to Avoid:
Electrameccanica Vehicles Corp. (SOLO)
Based in Burnaby, Canada, SOLO develops, manufactures, and sells electric vehicles, notably its flagship single-seat model, the SOLO. Additionally, it is advancing the development of the four-wheeled eRoadster and Tofino. The company also offers comprehensive services, repairs, support, and sales of parts and custom-built vehicles.
SOLO’s asset turnover ratio of 0.02x is 97.8% lower than the industry average of 0.98x. In addition, the stock’s trailing-12-month cash per share of $0.62 is 73.9% lower than the industry average of $2.36. Furthermore, its ROCE of negative 80.44% compare with the 11.78% industry average.
For the fiscal 2023 third quarter that ended September 30, 2023, SOLO’s operating loss came in at $14 million. Its net loss and loss per share stood at $19 million and $0.16, respectively, during the quarter. Furthermore, as of September 30, 2023, the company’s cash and cash equivalents amounted to $73.47 million, down from $134.26 million as of December 31, 2022.
The consensus revenue estimate of $601.16 thousand for the fiscal year that ended December 2023 indicates a 91.2% year-over-year decline. Moreover, the company is expected to report a loss per share of $0.46 for the period. SOLO shares have plunged 75.7% over the past year, closing the last trading session at $0.26.
SOLO’s bleak prospects are reflected in its POWR Ratings. The stock has an overall rating of D, which translates to Sell in our proprietary rating system.
SOLO has a D grade for Stability and Quality. It has ranked #41 out of 52 stocks within the same industry.
Click here to access the additional SOLO ratings (Growth, Value, Momentum, and Sentiment).
What To Do Next?
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TM shares were trading at $222.87 per share on Wednesday morning, up $4.01 (+1.83%). Year-to-date, TM has gained 21.53%, versus a 4.60% rise in the benchmark S&P 500 index during the same period.
About the Author: Aanchal Sugandh
Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.
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