The market participants seem to be in the process of separating the leaders from the laggards in the EV sector. The hyped Lucid Group (NASDAQ:LCID) stock continues to trend lower while some of the best EV stocks have trended higher year-to-date.
Lucid is just one example in an industry that’s characterized by intense competition. Going forward, there will be mergers, acquisitions, and bankruptcy in the industry. It therefore makes sense to stay with the best.
In terms of industry tailwinds, there is little doubt that the potential is immense. For 2023, it’s expected that EV car sales globally will be 14 million and EVs are likely to account for 18% of total car sales. By the end of the decade, EVs are expected to account for 60% of total car sales. Therefore, there is ample headroom for growth and the market leaders are positioned to create immense value.
Let’s therefore discuss three of the best EV stocks to buy and hold.
Tesla (TSLA)
If there was one EV stock that I had to hold in my portfolio, it would be Tesla (NASDAQ:TSLA). I believe that Tesla will continue to grow through a combination of innovation and aggressive investments. There has been some sell-off in TSLA stock in the recent past and it seems like a good opportunity to accumulate.
In terms of delivery growth, the outlook is positive considering the product line-up. Tesla is due to launch Cybertruck, Roadster, and Tesla Semi. This will ensure healthy revenue growth in the next few years.
It’s also worth noting that Tesla ended Q2 2023 with $23 billion in cash and equivalents. Further, operating cash flow for the first half of the year was $5.6 billion. With high financial flexibility, Tesla is positioned to invest aggressively in new factors to expand production.
There are estimates pointing to Tesla’s supercharger business being worth $10 to $20 billion by the end of the decade. With these positives, TSLA stock looks attractively valued from a long-term investment horizon.
Li Auto (LI)
Li Auto (NASDAQ:LI) has surged by 90% year-to-date. I however believe that the stock is attractively valued and is among the best EV stocks to buy and hold.
The rally for LI stock has been backed by strong business developments. The company’s delivery growth has been stellar after the launch of multiple new models. For Q2 2023, Li Auto delivered 86,533 vehicles, which was higher by 201.6% on a year-on-year basis.
Another point to note is that the company reported a robust vehicle margin of 21% for the quarter. With $1.33 billion in free cash flows for Q2, Li Auto is poised to become a cash flow machine. Further, the company has $10.17 billion in cash and equivalents. With high financial flexibility, the company is positioned for aggressive retail expansion and investment in innovation.
It’s worth noting that the company’s peers like Nio (NYSE:NIO) and XPeng (NYSE:XPEV) have already expanded into Europe. Considering a strong balance sheet, Li Auto is likely to expand beyond China in the coming years.
Panasonic Holdings (PCRFY)
Among EV battery stocks, Panasonic Holdings (OTCMKTS:PCRFY) is worth buying and holding through 2030. The stock has been in an uptrend with a rally of 38% for year-to-date. However, PCRFY stock remains attractive at a forward price-earnings ratio of 8.38. Additionally, the stock offers a dividend yield of 1.89% and I believe that healthy dividend growth is likely in the coming years.
I believe that aggressive expansion and innovation are the two factors to be bullish on Panasonic. The company believes that it needs to add four more EV battery plants to boost annual EV capacity to 200 gigawatt hours by 2031. Addition of new battery plants would imply steady revenue and earnings growth.
On the innovation front, Panasonic stands second when it comes to the number of patents related to solid-state batteries. The company is also working towards a 20% increase in battery energy density by 2030. Further, Panasonic has also developed a way to slow battery degradation.
On the date of publication, Faisal Humayun did not hold (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.
