Electric vehicles (EVs) are undoubtedly the future of transportation. However, EVs still comprise around 1% of the roughly 250 million vehicles on U.S. roads today. This means there’s massive growth potential ahead, as the world transitions away from gas-powered cars over the coming decades. Indeed, no one should be surprised that several pure-play EV stocks have already soared tremendously on expectations of surging demand.
Many automakers target 50% EV sales penetration by 2030, while regulators worldwide are instituting stricter emissions requirements and setting aggressive EV adoption targets. Major growth catalysts like improving battery technology, expanding charging infrastructure, and rising gas prices will accelerate EV adoption.
While shares of certain EV manufacturers now look richly-valued, some under-appreciated EV ecosystem plays still offer monster growth potential at reasonable valuations. Aside from the EV makers, shares of several EV battery and charging companies appear poised to deliver outsized returns in the years ahead. These ‘picks and shovels’ plays have impressive runways for growth as EV penetration rates steadily rise over the next decade.
Savvy investors can position themselves to generate substantial wealth from the secular EV adoption trend by identifying the most promising EV ecosystem stocks still trading at attractive valuations. Here are three EV stocks with massive growth potential ahead.
ChargePoint (CHPT)
ChargePoint (NYSE:CHPT) has become the clear leader in the fast-growing electric vehicle (EV) charging market. The company holds an estimated 70% market share in North America and Europe in networked Level 2 charging. With over 5,500 commercial and fleet customers, ChargePoint manages over 173,000 charging ports.
The global EV charging infrastructure market is projected to grow at a 36% compounded annual growth rate (CAGR) from 2023 to 2030, totaling an eventual $141 billion. This exceptional growth will be driven by surging EV adoption worldwide, as EV sales are estimated to grow at a 23.1% CAGR over the next decade.
ChargePoint is well-positioned to capitalize on this secular growth trend. The company is continuously rolling out innovative new hardware and software solutions to make EV charging faster, easier, and more accessible. ChargePoint’s open network model also allows it to expand its reach and monetize roaming charges.
Even if ChargePoint only maintained 50% of its existing market share moving forward, the company’s revenue would still expand in line with broader industry growth. Profit margins should swell considerably, with operating leverage also kicking in over time.
ChargePoint expects to turn EBITDA positive by the end of the year. With shares trading around $5.7, CHPT stock offers substantial upside for long-term investors willing to ride out potential near-term volatility. The consensus price target sits at $11, implying 93%-plus upside for investors looking to get in now.
Nio (NIO)
Though it may not become the next Tesla (NASDAQ:TSLA), Nio (NYSE:NIO) is carving out a profitable niche in the high-end of China’s booming EV market. Nio smartly targets a premium segment with its stylish, technologically-advanced vehicles.
The company sells three electric SUVs priced from around $50,000 to $70,000. Nio is also rolling out new sedan models and plans to launch a mass-market brand in 2025. These vehicles compete against luxury brands like BMW (OTCMKTS:BMWYY) and Mercedes (OTCMKTS:MBGYY).
Nio’s competitive edge includes its industry-leading battery swapping stations. Chinese consumers have embraced the convenience and speed of swapping depleted batteries for fully charged ones, rather than plugging in. Nio operates over 1,747 swap stations, and aims to multiply that number in the coming years.
The Chinese EV market will balloon from five million yearly auto sales in 2022 to more than 10 million by 2025. Nio only needs a sliver of this vast opportunity to thrive. With China’s affluent upper-middle class booming, Nio can dominate the premium niche and deliver huge profits.
Though some view Nio’s China focus as a weakness, Chinese automakers now manufacture world-class vehicles. Nio will also expand internationally over time. With shares trading around $10 apiece, NIO stock offers substantial upside if the company executes well. I admit that there is a lot of pressure on both its top- and bottom-line in the near-term, but analysts expect year-end revenue growth to be 18.14% this year and shoot past 55% next year. Accordingly, the consensus price target of $14.24 implies 35% upside potential.
Luminar Technologies (LAZR)
Luminar Technologies (NASDAQ:LAZR) has seen its stock languish around the $5 level, despite the impressive long-term promise of LiDAR technology for autonomous driving. While negativity has mounted amid production delays, I remain staunchly bullish on Luminar’s immense growth prospects.
LiDAR (light detection and ranging) is widely viewed as the superior sensor technology for enabling safe autonomous driving. This technology provides high-resolution 3D scans of a vehicle’s surroundings in all conditions. The biggest hurdle has been LiDAR’s high cost, but rapid improvements are making the technology cost-effective enough for commercialization.
Luminar aims to begin volume production with key partners like Volvo (OTCMKTS:VLVLY), Mercedes, and Nissan (OTCMKTS:NSANY) in 2023 and 2024. Its forward-looking order book is expected to be near $1 billion by the end of this year, and management believes that it could cross $60 billion by the end of this decade, even with 3-4% penetration. In addition, Luminar expects to turn gross margin positive by year-end as production scales.
The autonomous vehicle market is forecast to surge to $3 trillion by 2031. Luminar has preeminent technology, deep auto partnerships, and pole position in this enormous opportunity. Despite bumps in the road, the company appears well on its way to dominating the essential LiDAR space.
On the date of publication, Omor Ibne Ehsan 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.
