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Are These 3 Electric Car Stocks Still Worth Buying? The analyst weighs
Electric cars are growing in popularity, a trend fueled by social acceptance, a green mindset, and the recognition that the internal combustion engine has its flaws. Some of these flaws are corrected by electric vehicles (EVs). They bring less emissions, less pollution to the car and the promise of high performance irrelevant. At the moment, the main drawbacks are the high cost and the relatively short range of current battery technology. Despite this, many consumers have decided that the benefits outweigh the costs and EV sales are increasing. China, in particular, has long been known for its pollution and smog problems, and the government is actively pushing electric vehicles as a possible improvement factor. In addition, electric vehicles, with their rapid acceleration and (usually) short range, are ideally suited to China’s crowded – and growing – urban centers. In a comprehensive review of the Chinese electric vehicle industry, Alexious Lee, analyst at Jefferies, said, “We are constructive about the outlook for NEV in China as the country continues the trend of ‘electrification to digitization’. As the JVs of global automakers rapidly roll out new models of energy-saving vehicles (HEV and PHEV) to comply with the top-down goal of reducing Corporate Average Annual Fuel Consumption (CAFC), automakers Chinese (alumni and startups) are motivated to rapidly accelerate BEV adoption with entry-level, city commuting models and advanced high-end models. “Against this backdrop, Lee selected one Chinese VE stock that is worth owning and two that investors should avoid at this time. We used TipRanks’ database to find out what other Wall analysts are doing. Street have to say about the prospects of these three. Li Auto (LI) Chinese electric vehicle company Li Auto boasts of having the country’s best-selling electric vehicle model. The Li ONE sold 3,700 units in October last year, bringing the total number sold in the first year of production to 22,000. At current sales and production rates, Li expects the company to double its annual sales this year. This is a big problem in the world’s largest electric car market. China produces more than half of all electric vehicles sold in the world and almost all electric buses. Li Auto, founded in 2015, is focused on rechargeab hybrids the – models which can be connected to a charging station to maintain the battery, but which also have a combustion engine to compensate for low density charging networks. The Li ONE is a full-size hybrid electric SUV that quickly found popularity in its market. Li Auto went public on NASDAQ in July 2020. During the IPO, the company started with a share price of $ 11.50 and closed on day one with a 40% gain. In the months that followed, LI appreciated 116%. These stock gains come as the company reported strong earnings. In Q320, the most recent quarter, LI posted revenue of $ 363 million, up 28% sequentially, and takes the lion’s share of the $ 369.8 million in total revenue of the company. Also positive, Li announced a sequential 149% increase in free cash flow, to 110.4 million US dollars. Lee is impressed with Li Auto’s technology, noting that “Li One’s EREV powertrain has proven to be a great success with (1) extended range, (2) limited impact of low temperatures, (3) easier acceptance by car buyers. The advantage is sustainable ahead of the battery cost parity, estimated at FY25 (LFP) and FY27 (NMC), making LI AUTO the automaker to make OCF positive and profitable earlier than its peers. The analyst added, “LI AUTO is the first in China to successfully market an Extended Range Electric Vehicle (EREV) which is a solution to the range anxiety of drivers and the high BOM of automakers. . Powered by fuel, the ER system provides an alternative source of electricity in addition to the batteries, which is very noticeable in low temperature environments where BEVs can lose up to 50% of the printed range. “Seeing the company’s technology as the main attraction for customers and investors, Lee began his coverage of LI with a buy rating and a price target of $ 44.50. That figure implies growth to up 25% in the coming year. (To view Lee’s track record, click here) There is broad agreement on Wall Street with Lee that this stock is a buy offer. LI stocks are listed Strong Buy consensus consensus, based on 6 reviews, including 5 buys and 1 hold. Shares are priced at $ 35.60 and the average price target of $ 44.18 is in line with Lee’s, suggesting 24 % up for the next 12 months. (See LI’s market analysis on TipRanks) Nio (NIO) Where Li Auto has the best-selling EV model in China, competitor Nio competes with Tesla of Elon Musk for the best market share in the Chinese Electric Vehicle Market. With a market capitalization of 90 mi Lliards of dollars, Nio is the largest Chinese manufacturer of electric cars. The company offers a diverse range of products, including lithium-ion battery SUVs and a water-cooled electric motor sports car. Two sedans and a minivan are on the drawing boards for a future release. In the meantime, Nio’s vehicles are popular. The company reported 43,728 vehicle deliveries in 2020, more than double the 2019 figure, and the last five months of the year have seen car deliveries increase for 5 consecutive months. December deliveries exceeded 7,000 vehicles. Nio’s revenue grew steadily and showed strong year-over-year gains in the second and third quarters of 2020. In the second quarter, the gain was 137%; in the third quarter it was 150%. In absolute numbers, third-quarter revenue reached $ 654 million. However, with stocks having advanced 1016% in the past 52 weeks, there is little room for further growth – at least according to Jefferies’ Lee. The analyst launched a cover on NIO with a Hold rating and a price target of $ 60. This figure implies a modest increase of 3%. “We use the DCF method to value NIO. In our DCF model, we factor in solid volume growth, positive net profit from FY24 and positive FCF from FY23. We apply a WACC of 8.1% and a terminal growth rate of 5% and arrive at the price target of US $ 60, ”explained Lee. Overall, Nio holds an analyst consensus moderate buy rating, with 13 reviews recorded, including 7 buys and 6 takes. NIO is selling for $ 57.71, and recent stock gains have pushed that price slightly below the average price target of $ 57.79. (See Nio’s stock market analysis on TipRanks) XPeng, Inc. (XPEV) XPeng is another company, like Li, in the mid-price level of the Chinese electric car market. The company has two models in production, the G3 SUV and the P7 sedan. Both are long-range EV models, capable of covering 500-700 kilometers on a single charge, and equipped with advanced autopilot systems for driver assistance. The G3 started deliveries in December 2018; the P7, in June 2020. In another comparison to Li Auto, XPeng also went public in the US markets in the summer of 2020. The stock premiered on the NYSE on the last day of August, priced at 23. $ 10, and on the IPO, the company raised $ 1.5 billion. Since the IPO, the stock has risen 127% and the company has reached a market capitalization of $ 37.4 billion. The increase in sales is the source of the share gains. XPeng said 8,578 vehicles delivered in the third quarter of 2020, a gain of 265% from the quarter last year. The bulk of those deliveries were P7 sedans – the model saw deliveries drop from 325 in T2 to 6210 in T3. Strong sales translated into revenues of US $ 310 million for the quarter, a truly impressive gain of 342%. Lee of Jefferies sees XPeng as a well-positioned company that may have maximized its growth in the short term. He writes: “XPENG has a very strong exposure to technology driven growth… While we prioritize its specialty in autonomous driving and power consumption efficiency, our FY21 sales growth forecast of 120% is lower than consensus while our FY22 forecast of 129% is higher given slower market acceptance and increased competition in the 200-300,000 rmb segment. To that end, Lee is pricing XPEV a Hold and his price target of $ 54.40 suggests a slight rise of around 4%. Recent gains from XPEV have pushed the price just above the average price target of $ 51.25; the stock is now selling for $ 52.46. This comes with a Moderate Buy analyst consensus rating, based on 8 reviews, breaking down to 5 buy, 2 take, and 1 sell. (See XPEV Stock Analysis on TipRanks) To find great ideas for EV stocks traded at attractive valuations, visit TipRanks Best Stocks to Buy, a newly launched tool that pulls together all the information about TipRanks stocks. Disclaimer: The opinions expressed in this article are solely those of the analyst presented. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
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