Even as electric-vehicle sales have been gaining traction, associated stocks have been crushed during 2022, led by Tesla.
Below is a screen of stocks of companies involved in the development, production or charging of electric vehicles that analysts believe will soar (or recover) the most over the next 12 months.
There are many different ways for investors to ride the EV trend. One favorite industry stock, Tesla Inc.
has been crushed. CEO Elon Musk has sold shares, in part to help fund his purchase of Twitter, which he took private in November. According to calculations by Dow Jones Data and MarketWatch, Musk has sold $39.3 billion worth of Tesla shares since November 2021. He said last week he wouldn’t sell any more for at least the next year and a half.
Tesla’s stock has fallen 68% during 2022, which has placed a drag not only on the S&P 500
but on any exchange-traded fund focused on the EV space.
This doesn’t mean that consumers or governments trying to reduce greenhouse emissions are shying away from electric vehicles. In its Global EV Outlook for 2022, published in May, the International Energy Agency said the number of electric vehicles on the road worldwide had tripled in three years to 16.5 million in 2021. That included battery electric vehicles (BEV) and plug-in hybrids (PHEV). EV sales during 2021 nearly doubled to 6.6 million, according to the IEA, with BEV making up about 70% of sales “[a]s in previous years.”
In projections that were updated in October, the IEA said that under current government policies it expected EVs to make up more than 25% of total global light-vehicle sales in 2030, with BEVs making up about two-thirds of sales. But under government policies tied to a “sustained development scenario,” the IEA projected EV sales would exceed 45% of total vehicle sales in 2030.
Looking at Tesla, which is still the BEV bellwether, 343,830 vehicles were delivered during the third quarter of 2022, up 42% from a year earlier.
Musk’s sale of Tesla shares, as well as all the distractions in the aftermath of his Twitter purchase and work as CEO of the social media platform, may not affect the long-term outlook for EV adoption, even if they might place a drag on Tesla’s sales going forward.
Tesla’s stock ended 2021 with a forward price-to-earnings ratio of 120.3, which was very high, compared with a P/E of 21.4 for the S&P 500
But the stock’s decline, along with rising profits for Tesla, have brought its P/E ratio down to 20, compared with 16.5 for the index.
So Tesla is no longer an expensive stock, especially for a company growing so quickly. You can expect more short-term jitters for Tesla, especially with the shutdown of its factory in Shanghai, and Musk’s ongoing Twitter saga. Maybe a broad approach to the EV space is best for long-term investors.
Screening EV stocks
There are different broad approaches investors might take to ride along with EV adoption over the years. One way to do this is to focus on batteries — especially lithium and other raw materials used to make them. Two exchange-traded funds that follow this space are the $3.5 billion Global X Lithium & Battery Tech ETF
and the Wisdom Tree Battery Value Chain and Innovation Fund
For the following EV-related stock screen, we are starting with the holdings of three ETFs that take broad approaches to the space:
The Global X Autonomous & Electric Vehicles ETF
holds 75 stocks of companies around the world that are involved with various aspects of development and manufacture of autonomous-driving systems and/or EVs. It has $800 million in assets under management and has a modified market-cap weighting, with Microsoft Corp.
as the top holding, making up 3.1% of its portfolio, according to FactSet.
The $389 million iShares Self-Driving EV & Tech ETF
holds 116 stocks. Its top holding is Eaton Corp.
which makes up 4.7% of the portfolio and produces electrical components used in vehicles.
The $192 million KraneShares Electric Vehicle and Future Mobility Index ETF
holds shares of 64 companies involved with EV development and manufacture, but adds exposure to lithium and copper mining, as well as fuel-cell technology. Its largest holding (5.6% of the portfolio) is Samsung SDI Co. Ltd.
which makes batteries and semiconductors.
You can click on each ETF’s ticker to learn more and see a list of its top 25 holdings.
Together, the three ETFs hold 195 stocks. We pared the list to 156 companies covered by at least five analysts polled by FactSet.
Here are the 20 stocks on the list with at least 75% “buy” or equivalent ratings that have the most upside potential over the next 12 months, based on consensus price targets:
|Company||Ticker||Country||Share “buy” ratings||Dec. 28 price||Price target||Implied 12-month upside potential|
|Li Auto Inc. Class A||
|Innoviz Technologies Ltd.||
|ChargePoint Holdings Inc. Class A||
|Piedmont Lithium Inc.||
|XPeng Inc. Class A||
|Indie Semiconductor Inc. Class A||
|Tianqi Lithium Corp. Class H||
|L & F Co. Ltd.||
|Lithium Americas Corp.||
|Renesas Electronics Corp.||
|Iljin Materials Co. Ltd.||
|Nio Inc. ADR Class A||
|Guangzhou Automobile Group Co. Ltd. Class H||
|Ecopro BM Co. Ltd.||
|BYD Company Ltd. Class H||
|Beijing Easpring Material Technology Co. Ltd. Class A||
|Shanghai Putailai New Energy Technology Co. Ltd. Class A||
Click on the tickers for more information about the companies.
Click here for Tomi Kilgore’s detailed guide to the wealth of information available for free on the MarketWatch quote page.
Tesla didn’t make the list. Out of 44 analysts polled by FactSet, 28 (or 64%) rate the shares a “buy” or the equivalent. The stock closed at $112.71 on Dec. 28 and the consensus price target is $265.75. The analysts expect Tesla’s stock to double over the next year.