We all know how the markets started this year by falling into correction territory. Electric Vehicle (EV) stocks were no exception, although there was no clear trend in the segment. Major EVs have fallen between 5% and 50% year-to-date, compared to the S&P 500’s 6% drop.
Inflation is a key to understanding that performance. EVs will require new factory processes in their manufacture, and new sets of raw materials – and those raw materials don’t come cheap. A combination of increasing demand, production bottlenecks, and a snarled distribution chain have pushed up prices for lithium, nickel, and cobalt, vital battery metals, anywhere from 16% to 70%. And in addition to metals, auto companies are finding it difficult to procure everything from semiconductor chips to window glass to flooring carpets. The result is a surge in EV prices, which on average now run some $10,000 per unit higher than combustion vehicles.
But this isn’t the only chapter in the story. EVs are also showing rapid technological improvements, with battery efficiency and vehicle range closing in on gasoline vehicle averages, and charging infrastructure expanding its footprint and adding newer ‘fast charging’ stations. We don’t know what the final look of the EV market will be; it’s clearly still evolving, and we’re in the early stages of the shift – but the consensus among the sector experts is, the future is electric.
And that’s the underlying fact which will provide support for EV stocks. If there’s a demand for the product, then that demand will get filled – and that will open up opportunities for investors. To get a picture of those opportunities, as they now stand, we’ve used the TipRanks database to pinpoint three EV stocks that give investors a chance to ‘buy the dip,’ at least according to the analyst community.
We’ll start with a Canadian company, Quebec-based Lion Electric. This automaker focuses on some specific niches – fully electric school busses, urban transit busses, and commercial trucks. The company is one of North America’s largest EV manufacturers, and in addition to its line of 7 vehicles, Lion offers customers additional services such as parts & services, charging infrastructure, and financing. The company bills its vehicles – especially the flagship school busses – as turnkey solutions, and includes technician and driver training in the package. Lion boasts that all of its vehicles, of which some 550 are currently on the road, are zero-emission.
By staking out a niche – school busses and commercial trucks – with essential needs, Lion has positioned itself to readily compete for sales, and has seen recent successes. In the last two months of 2021, Lion had orders from two companies, both in Canada, for school busses, totaling 255 units. These orders will begin delivery this year, and continue through 2025 and 2026. More recently, on April 4, Lion announced another Quebec-based school bus order, for 50 units, with deliveries to start in 1Q23.
On the commercial truck side, Lion earlier this month launched a new lightweight, all-electric heavy-duty truck for the urban ‘last mile’ delivery market. Urban last mile delivery is a niche well-suited to electric vehicles, as the trucks can remain within easy range of their base for charging. Lion’s new vehicle features a chassis and box that is 40% than previous models.
Lion will release its 1Q22 numbers in May, but we can get a feel for the company’s position by a look at its last report, for 4Q21. The company delivered 71 vehicles that quarter, up by 25 units from the 46 deliveries in 4Q20. Top line revenue came in at $22.9 million, up 69% year-over-year – and the highest quarterly revenue of 2021. The company ran net losses in Q1 and Q2 of last year, but turned profitable in Q3 and Q4, with Q4 EPS coming in at 14 cents. Despite these gains, the shares are down 29% this year.
In the eyes of Canaccord’s 5-star analyst Jed Dorsheimer, Lion is an EV maker with plenty of potential going forward. He writes, “Lion Electric has a first mover advantage in the EV school bus market... With an order book of 2000+ units, Lion Electric is well positioned to capitalize on electrification of this segment... Lion is leveraging its success in the school bus market to fund the build-out of a wider portfolio of chassis to increase penetration in a range of CEV segments..."
"With nearly 600k units of Class 4-8 trucks sold annually in North America, we believe Lion Electric is positioned to be one of the first to market with a flexible manufacturing platform that can serve several commercial fleet applications. Success in school buses provides a platform into other key CEV segments with large and growing TAMs,” the analyst added.
All of the above makes it clear why Dorsheimer is now standing with the bulls. The top-rated analyst gives LEV a Buy rating along with a $12 price target. This figure reflects his belief in ~74% upside over the next 12 months. (To watch Dorsheimer’s track record, click here)
Overall, LEV has picked up a Moderate Buy rating from the Street, based on 6 recent analyst reviews that include 4 Buys and 2 Holds. The stock is selling for $6.91 and its $13 average price target indicates room for 88% growth in the year ahead. (See LEV stock forecast on TipRanks)
Next up is Lucid Group, a California-based company stepping into the luxury EV segment. Lucid has several models in production, and is in the process of building out its manufacturing facilities to accommodate its customer reservations, which currently stand at more than 25,000. The company’s vehicles feature high performance, range between 400 and 500 miles, and are priced between $95,000 and $169,000.
Lucid went public last summer, through a SPAC transaction with Churchill Capital Corporation. The merger saw the LCID ticker enter the NASDAQ on July 26. The stock has been volatile since then, however, and Lucid’s shares are down 45% year-to-date.
Since going public, Lucid has released two earnings reports, for Q3 and Q4 of 2021. In the Q4 report, the company noted over 125 vehicle deliveries by the end of 2021, and a total of 300 as of February 28, 2022. Production has exceeded 400 vehicles, and the company foresees a total of 14,000 units produced by the end of this year.
Ramping production and delivers have turned on the company’s revenue stream. Lucid reported $26.4 million at the top line in Q4, up 626% year-over-year. The company had over $6.2 billion in cash on hand as of the end of 2021.
Covering this stock for BNP Paribas, 5-star analyst James Picariello explains why Lucid’s start in the luxury segment will lead to expanded opportunities in the larger EV universe: “LCID will not have any problems competing in a much more hypercompetitive EV environment, as its full, in-house, vertically integrated powertrain system does all the talking. For a ~$36B market cap company, our sense after several conversations with the Co. and a few investors, is that LCID’s powertrain prowess can be much better understood."
"We also believe 'on paper' its positioning within the luxury vertical has less of a broader appeal. Once its unique, global-leading powertrain efficiency is properly appreciated, this is when a tipping point should take place for all investors, current and new, in the stock to realize just how large the LCID TAM truly is, as well as just how extensive the Co. can outcompete other OEMs on either performance or cost, and typically, BOTH,” the analyst added.
To this end, Picariello rates LCID an Outperform (i.e. Buy), along with a price target of $45. Investors could be pocketing gains of ~116%, should Picariello's forecast hit the mark over the next 12 months. (To watch Picariello’s track record, click here)
The projection amongst Picariello's colleagues is for plenty of upside, too. The average price target stands at $40.50 and suggests 94% of share gains over the next 12 months. Overall, the stock has a Moderate Buy consensus rating, based on 3 Buys and 1 Sell. (See LCID stock forecast on TipRanks)
The last stock we'll look at is Fisker, a California-based EV maker established by the well-known automotive luxury designer – and BMW vet – Henrik Fisker. Fisker is working to promote his Ocean all-electric SUV, which debuted at the 2021 LA Auto Show. The vehicle features a solar-panel roof and is on track to enter regular production later this year.
In addition to the Ocean, Fisker is also now accepting reservation for its second vehicle, the PEAR (Personal Electric Automotive Revolution). This 5-seat EV will start at $29,900, and is scheduled for deliveries in 2024. The PEAR will be produced in Ohio, and the company anticipates a production rate of 250,000 units annually.
Currently, Fisker is operating with minimal revenue, making the stock highly speculative. The shares get support from the industry’s overall faith that Henrik Fisker can live up to his reputation for results. While he has delivered in the past, and his company has a disciplined cash spending plan, the stock is still vulnerable to market volatility – and FSR is down 27% year-to-date.
Investors can find some additional good news in the company’s recent 4Q21 report. Fisker had $1.2 billion in cash available at the end of 2021, which is considered enough to fund the production launch of the Ocean this coming November. That launch is, in turn, supported by customer reservations currently exceeding 40,000. So far, 2022’s reservation pace for the Ocean is up 400% compared to last year. Fisker is currently running a production line for 2 prototype Ocean vehicles per day, which are used in the company’s global certification test and validation program.
Let’s check in with BNP Paribas' James Picariello again, as the EV expert has covered FSR, too. The analyst notes the PEAR as a valuable ‘second act’ for Fisker, but points to the Ocean as the key factor for investors to consider.
“If there is going to be demand for the Fisker Ocean, we are certain of its supply and build quality. Given the highly affordable price points of the Ocean, and deliberate attempts to separate it from the old guard through offerings such as a lifetime Flex-Lease option, we think the Ocean has all the makings to work," Picariello opined.
The analyst summed up, "We consider FSR to be an intriguing way to play the EV space in a smaller cap fashion and gain exposure to a company that is making deliberate strategic decisions far away enough from the OEM mainstream, not only to be interesting, but also to take some risks off the list, as opposed to adding more."
In Picariello’s view, this adds up to an Outperform (i.e. Buy) rating, and his $22 price target implies an upside of ~90% in the next 12 months.
All in all, Fisker has picked up 7 recent analyst reviews in recent weeks, with 6 Buys and 1 Hold making for a Strong Buy consensus rating. The stock’s $22.17 average price target suggests it has ~92% upside from the current trading price of $11.55. (See FSR stock forecast on TipRanks)
To find good ideas for EV stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.
Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
