“Shark Tank” investor Kevin O’Leary predicted mortgage rates will exceed 8%. He also emphasizes the historically low unemployment rate and the impact of remote working enabling individuals to relocate to sunnier locations in lower-tax states like Texas and Florida. O’Leary believes those factors will boost housing demand and drive up prices in those regions. The predicted surge will likely lift consumer confidence, leading to increased spending and investment.
Most notably, the housing market’s strength indirectly benefits electric vehicle (EV) stocks. The influx of residents should drive demand for infrastructure like EV charging stations and renewable energy projects. That push allows EV companies to expand and contribute to sustainable transportation solutions. These three EV stocks are doing just that, giving them catalysts for long-term growth.
BorgWarner (BWA)
BorgWarner (NYSE:BWA) is a company in the automotive parts industry, specializing in providing technologies and solutions for a variety of automotive vehicles. They can range from heavy-duty internal combustion vehicles to light vehicle EVs.
The automotive parts industry is expected to reach a valuation of over $1.11 trillion by 2032, assuming a 7.5% compound annual growth rate (CAGR). The prime catalysts include increased demand from consumers for aftermarket modifications such as cosmetic or performance modifications.
BorgWarner boasts strong financials, with $4.5 billion in Q2 2023 revenue growing at a 20.2% 1-year CAGR, and cash from operations of $280 million growing 29.6% YoY. The company demonstrates that management has made worthwhile investment decisions with $17.3 billion in total assets increasing 7.2% YoY. Lastly, BorgWarner shows signs of being an undervalued investment with a P/E ratio of 40% less than the sector median.
The company’s key partnerships with EV businesses position it for expansion within the industry. A collaboration with Onsemi integrates silicon carbide (SiC) devices into BorgWarner’s VIPER power modules, enhancing cooling, extending battery range and improving battery performance. Chinese EV manufacturer Li Auto (NASDAQ:LI) also partnered with BorgWarner for its advanced integrated driving module (iDM220), incorporating VIPER power modules. That partnership empowered Li Auto’s flagship SUVs (L8 and L9) with BorgWarner’s efficient power module capabilities.
Yahoo! Finance reported that 14 analysts predicted a 1-year price range on BWA stock of between $44.00 and $67.00, with an average of $51.51. This pick is a must-buy EV stock this September because of the company’s strong financials and previously mentioned partnerships.
XPeng (XPEV)
XPeng (NYSE:XPEV) is a Chinese Smart EV manufacturer that designs, develops, manufactures and markets Smart EVs. The company’s objective is to use technology to accelerate the Smart EV transition, influencing the future transportation experience.
The global EV market was valued at $163.01 billion in 2020 and is projected to reach $823.75 billion by 2030 at a lofty 18.2% CAGR. The steady rise in fuel prices, combined with the shift to EV vehicles from gasoline-powered, has enabled the market to continue growing and shaping the EV sector.
Despite XPeng having $698 million in revenues during its most recent quarter — down 37.11% — the company is steadily growing back and becoming more financially stable. Analysts expect the company to grow by 29.5% in 2024.
XPeng’s strategic partnerships with prominent EV companies position it favorably for sustainable market expansion in the long term. One notable instance is its recent collaboration with DiDi, a company specializing in autonomous driving technology. The partnership underscores XPeng’s commitment to gaining a competitive advantage in the future.
In addition, the consistent increase in sales reflects the local community’s growing support and demonstrates XPeng’s upward trajectory. In July alone, the company reported a significant milestone, delivering 11,008 Smart EVs. That accomplishment marked a stunning 28% growth compared to the previous month. The achievement signified XPeng’s sixth consecutive month of robust delivery growth.
According to MSN, 16 analysts rated XPEV as a Buy or Strong Buy. They predicted a 1-year price target range between $8.00 to $32.99, with an average of $19.11. XPEV is a must-buy EV stock.
Li Auto (LI)
Li Auto is an EV company in China that designs, manufactures and sells EVs. The company provides services in post-sales management, corporate administration and manufacturing equipment.
LI stock is currently at $41.65 — up 98.5% year-to-date (YTD). CNN Business reported that 35 analysts had positive outlooks for LI, giving the stock a 12-month median to high upside of 30.3% to 71.6%.
The China EV market size is expected to grow at a robust pace in the coming years. LI’s current value is $260.84 billion and is forecasted to reach $575.56 billion by 2028 at a 17.15% CAGR. EV sales in China grew by 82% in 2022, and China’s 2060 goal of carbon neutrality will continue to drive EV adoption in the country. The availability of more affordable EV models and improved battery technology will make the vehicle type more attractive to consumers.
Li Auto has strong financials. Revenue for FY22 of $6.68 billion represented a 59.4% YoY growth. The company also had exceptional profitability with a levered free cash flow (FCF) margin of 23.51%, beating its competitors’ 5.05% rate by an amazing 365.82%. Those impressive financial metrics highlight the profitability of Li Auto’s next-gen vehicles and ability to deliver considerable returns to investors.
Recently, Li Auto announced plans to introduce a new battery electric vehicle (BEV) by the end of 2023, with three more in 2024. That move will open new doors for the company, as it previously focused solely on hybrid-style vehicles.
Chief Executive Officer (CEO) Li Xiang remarked that the company will “become the no.1 premium car brand in China in 2024 in terms of sales.” Li Auto will set up 300 fast chargers on highways this year and have 3,000 by 2025 to cover most of the country’s major economic zones. Those new prospects could help LI gain market leadership and enjoy long-term growth.
LI stock presents itself as an attractive investment option.
On the date of publication, Michael Que 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.
