The electric vehicle market has gained a lot of traction in the past few years. This trend is due to a couple of reasons: one, governments worldwide have been pouring money into the industry, usually via subsidies, and two, consumers have begun shifting their preferences from carbon emissions vehicles. This has led to the rise of small-cap EV stocks to buy.
As this industry receives record levels of investment from governments and ordinary investors alike and continues to pique the interest of consumers, stock market investors should be on the lookout for buying opportunities.
While Tesla (NASDAQ:TSLA) remains a leader in the EV industry, there are many other players who are vying for a slice of the pie. Some of them are small-cap companies that have innovative products, strong growth potential, and attractive valuations. These companies could also become acquisition targets for larger automakers or tech giants that want to enter or expand their presence in the EV space.
Thus, here are three small-cap EV stocks that could possibly be acquired soon.
Workhorse Group (WKHS)
Workhorse Group (NASDAQ:WKHS) is a maker of electric delivery vans and trucks that are designed for last-mile delivery services. The company sells three lines of battery-electric vans with varying payload or carrying capacities, and all of the company’s electric vans have a range of up to 150 miles on a single charge. The company also offers the HorseFly and Falcon, both of which are drone delivery systems.
In 2022, Workhorse delivered 33 electric vans in 2022 and expects to continue ramping up production throughout 2023. For the current year, the company issued a revenue guidance of $75 to $125 million. Companies at this size tend to give lofty guidance numbers and this is reflected in the company’s performance numbers year-to-date. In the first half of 2023, Workhorse delivered 52 electric vans, generating only about $5.7 million in revenue. Though revenues are well below expectations, year-over-year growth has been substantial, to say the least. This helps make it one of those small-cap EV stocks to buy.
Workhorse could be an attractive acquisition target for a larger EV company that wants to enter the fast-growing market of electric delivery vehicles, or for a logistics or e-commerce company that wants to optimize its delivery operations and reduce its emissions.
Canoo (GOEV)
Canoo (NASDAQ:GOEV) is a U.S.-based EV startup that focuses on subscription-based mobility services. The company’s flagship product is the Canoo Lifestyle Vehicle, which is a spacious and futuristic-looking van that can seat up to seven people. Canoo also plans to launch a pickup truck and a delivery vehicle in 2023, targeting the commercial and fleet markets. The company’s vehicles are built on a proprietary skateboard platform, which integrates the battery, motor, and other components into a modular chassis that can accommodate various body types and sizes. Canoo has not generated any revenue yet, but it expects to be able to deliver 20,000 vehicles annually once production and manufacturing scale.
With a market capitalization of $332 million, Canoo could be an attractive acquisition target for a tech giant that wants to enter the mobility-as-a-service (MaaS) market, which is expected to grow at a compound annual growth rate (CAGR) of 32% from 2022 to 2030, according to market research. The company’s skateboard platform could also be licensed to other automakers or partners who want to create their own custom vehicles.
AEHR Test Systems (AEHR)
AEHR Test Systems (NASDAQ:AEHR) is not an EV maker, but it provides testing equipment and services for EV components such as silicon carbide (SiC) devices and sensors. SiC devices are used in EV powertrains because they offer higher efficiency, lower losses, and higher temperature tolerance than traditional silicon devices. AEHR Test Systems has seen strong demand for its products from leading EV makers and suppliers such as Tesla.
As a result, the company’s revenues have grown substantially over the past couple of years. As of the end of May 31, AEHR has a record effective backlog of $39.7 million and expects to deliver “at least $100 million” in revenue for its fiscal year 2024 (which ends in May). This makes it one of those small-cap EV stocks investors should pay attention to.
The testing equipment company has a market capitalization of $1 billion, which is quite low compared to other semiconductor equipment makers such as Applied Materials (NASDAQ:AMAT) and Lam Research (NASDAQ:LRCX), which have market caps of $120 billion and $87 billion, respectively. AEHR Test Systems could be an attractive acquisition target for a larger semiconductor equipment maker that wants to increase its exposure to the EV market, which is expected to drive the demand for SiC devices and sensors in the coming years.
On the date of publication, Tyrik Torres did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
