Electric vehicles have been with us since the dawn of automobiles; several early models a century ago were electrically powered. But the technology involved – in power generation, in batteries, in electric drive motors and power trains, in chassis and body design and materials – is coming into its own now. Today’s electric cars share the same styling as gasoline vehicles, can match or exceed legacy vehicles’ performance, and are rapidly gaining in reliability and battery charge range.
The explosion of electric vehicles has brought us an array of new companies taking advantage of the many openings offered by changes in the auto industry. It’s not just building the E-cars; it’s also building out the charging networks, developing new batteries, disposing of old batteries, maintaining the cars, training mechanics in the new systems – new companies are sprouting up to fill these, and many more, niches.
So where should a savvy investor start looking? We’ve used the TipRanks platform to pull up the details on three stocks tied to the emerging electric vehicle industry in a variety of ways. These are Buy-rated equities, with considerable upside potential – and recent thumbs up from Wall Street analysts.
We’ll start with batteries. Specifically, with battery recycling. Li-Cycle is a new company, founded just 5 years ago in 2016 to take advantage of the market for recycled battery materials. Li-Cycle is well positioned to benefit from the shift to electrification and demand for battery materials as its lithium-ion battery recycling solution provides an outlet for spent batteries and a sustainable source for materials to be used in recycled batteries.
Li-Cycle estimates that the industry will produce over 15 million tons of discarded lithium-ion batteries by 2030, and is positioning itself to manage the collection and processing of this waste, to the aim of recovering the usable materials. According to the company, up to 95% of the battery materials can processed for recovery, reducing the amounts of waste in landfills.
Earlier this month, Li-Cycle announced that it will be opening a new battery recovery facility in Alabama, substantially increasing the company’s footprint. The Alabama facility, to be located in Tuscaloosa and aimed for a mid-2022 opening, will open with a capacity of 5,000 metric tons of battery manufacturing scrap and potential to double that down the line.
This company is new to the public markets, having gone public on August 11 through a SPAC transaction. That business combination, with Peridot Acquisition Corporation, included $580 million new capital for Li-Cycle, which is being used to fund the company’s facility expansion.
Since going public, Li-Cycle has also released its first quarterly report as a public entity, for the fiscal third quarter of 2021, which ended on July 31. LICY reported $1.7 million in revenues for its fiscal Q3, up some 840% year-over-year. The magnitude of the gain reflects the fact that this past year the company commenced operations in materials recycling.
Wedbush's 5-star analyst Daniel Ives sees Li-Cycle as a "green EV recycling pure play," and rates it a Buy along with a $14 price target. At current levels, this target suggests ~37% upside for the year ahead. (To watch Ives’ track record, click here)
Backing this stance, Ives writes: “The EV revolution is in the early innings of playing out, and as more and more EVs hit the road over the decade, companies will turn to Li-Cycle, which is the pure-play lithium-ion recycler in the market, as the source for battery-grade materials. So as demand for lithium, nickel, and cobalt continues to rise, Li-Cycle will have the supply to fulfill growing customer needs. We believe that the lithium-ion recycler is in a good position to double its gross margins by 2025."
Overall, Wall Street appears to agree with the Wedbush assessment. There are 6 analyst reviews on file for Li-Cycle, and they include 5 to Buy against just 1 to Hold. The stock is selling for $10.20 and its $13.83 average price target implies an upside of ~36% in the next 12 months. (See LICY stock analysis on TipRanks)
Next up, Lightning eMotors, is a company working both sides of the EV equation at once – the vehicle side, and the charging station side. But this is a company that takes ‘thinking out of the box’ as an axiom, and it doesn’t do EVs the same way as everyone else. Rather, Lightning produces electric vehicles for fleet use, in the medium- and heavy-duty truck niches, along with shuttle buses, vans, chassis cabs, and urban transit buses. The company manages this by producing electric drive systems and powertrains, which are then mated to existing gasoline vehicle chassis such as the Ford Transit 350HD, Ford E-450 buses, Ford F-550 cargo trucks, the Chevy 6500XD Low Cab Forward, and various transit buses in the 30-foot to 40-foot sizes.
On the charging station side, Lightning’s charging station division produces EV charging points, and provides the installation, support, and ongoing maintenance needed to keep them in operation. The company has pioneered a Charing as a Service (CaaS) business model, based on customer subscriptions.
Like LICY above, this stock entered the public markets through a SPAC agreement earlier this year. The transaction was completed in May, with GigCapital3, and the ZEV ticker debuted on May 7. The company gained $216.8 million in net capital proceeds from the SPAC transaction
In August of this year, Lightning reported its second quarterly results since the SPAC completed. The report, for 2Q21, showed $5.9 million in revenue, up significantly from the $900,000 recorded in the year-ago quarter. Lightning reported the sale of 37 ‘zero emission’ powertrain systems in Q2, a 300% year-over-year increase.
Looking forward, Lightning has a substantial order backlog, valued at more than 500% of the year-ago quarter’s orders. The backlog includes powertrain system conversions, powertrains for sale directly to customers, and approximately 1,600 charging system units. The increase in the backlog reflects customer demand for Lightning’s products and services.
Looking at Lightning, D.A. Davidson analyst Michael Shlisky believes that the company’s success in delivering is sustainable.
“ZEV is one of the few EV companies delivering on a real, binding backlog today, and is booked well into 2022. While some investors may not like the idea of using an existing ICE vehicle as a starting point for an EV, the truth is that fleets like the silhouettes they are used to, and like the serviceability of the balance-of-truck at major, name-brand dealerships. We would remind them that the cash is just as green. ZEV is also electrifying niche categories that others are not likely to touch. Net/net, we believe there is a lot to like here,” Shlisky wrote.
Based on the above, Shlisky rates ZEV a Buy, and his $17 price target indicates room for ~86% upside potential for the year ahead. (To watch Shlisky’s track record, click here)
Overall, the 6 recent analyst reviews on this stock break down to 5 Buys against a single Sell, for a Moderate Buy consensus rating. The shares have an average price target of $13.20, which implies an upside potential of ~45% from the current share price of $9.12. (See ZEV stock analysis on TipRanks)
Last but not least is GreenPower Motor, a specialist in electric commercial vehicles, particularly transit buses. GreenPower main product line includes buses for transit systems and school districts, a niche well-suited to the EV concept as these vehicles tend to keep to short- and moderate-range routes within easy reach of their depots and charging stations. In addition, the company also produces the EV Star medium-duty truck cabs and chassis, a module which can be customized to fit a variety of trailer and van bodies fit for a range of purposes.
At the end of August, GreenPower released its BEAST, a purpose built, Type D, all-electric zero-emission school bus. The vehicle was showcased at the Advanced Clean Transportation Expo in Long Beach, California. Following up, the Vancouver-based company announced two weeks later it had delivered its first BEAST school bus, to the Santa Maria Joint Union High School District. The school district operates a fleet of over 30 buses, opening potential for additional sales.
GreenPower’s fiscal 1Q22 ended on June 30, and the company reported the results in August. The report showed $2.7 million at the top line, up 17% year-over-year. Highlights of the quarter included deliver of 21 EV Star vans to customers on the West Coast of the US and Canada.
Among the bulls is 5-star analyst Tate Sullivan from Maxim, who puts a Buy rating on this stock, and sets a $30 price target that implies a robust 12-month upside of 120%. (To watch Sullivan’s track record, click here)
Backing his view, Sullivan notes that GreenPower has a significant inventory holding, allowing the company to fill orders faster than competitors.
“We believe GP's higher inventory of $18.8M as of 6/30/21 versus F2Q22 revenue (June 2021) revenue of $2.7M suggests GP can deliver future client orders faster and will be less susceptible to potential supply chain disruptions. Commercial customers for EVs may continue to sporadically finalize orders, and having available vehicles to deliver immediately can be a form of a competitive advantage for GP, in our view…. GP's ‘finished goods’ inventory increased 159% q/q compared to a 25% q/q increase in ‘work in process’ inventory,” Sullivan noted.
All in all, this stock has a unanimous Strong Buy analyst consensus rating, based on 3 positive reviews set in recent weeks. The shares are trading for $13.80 and the average price target is $30.67, indicating a high 122% upside in the coming year. (See GP stock analysis 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.
