Experts say that the electric vehicle sector is starting to show weakness. Sales numbers are still growing but are displaying signs of slowing down, and analysts are pointing to high production costs and restrictive prices as the reasons. That’s why a few investors are getting wary of buying EV stocks.
However, there is still a growing interest in environmentally friendly vehicles, which can drive unit sales in the future. California Public Employees’ Retirement System, the largest pension in the US, recently bought several EV companies and piqued investor interest.
Furthermore, improved production processes and optimized raw material acquisition can lower production costs, making units more affordable. Investors interested in the sector may want to look at companies with healthy financials, optimistic outlooks, and future-oriented strategies.
So, we’ve compiled a list of three buy-rated EV stocks with potential for your consideration.
Rivian Automotive (RIVN)
In 2022, Elon Musk predicted that Rivian Automotive (NASDAQ:RIVN) and Lucid, two up-and-coming manufacturers, would go bankrupt unless something changes. This prediction seemed probable after the two companies went public in 2021 and tanked spectacularly, with RIVN going from an all-time high of $179.47 a few days after its IPO to around $17 this week.
However, while Lucid has cut production and lowered guidance for 2023, Rivian CEO and founder RJ Scaringe is doing the opposite by increasing forecasts and upping production targets by 2,000 by the end of the year. Additionally, the company has finally exited its exclusivity deal with Amazon, allowing it to sell its commercial electric vans to other interested parties. Its recently announced R2 mid-sized SUV line also shows promise due to its lower price point and production costs.
Rivian can be a great addition to your list of EV stocks to buy due to its confident outlook, decent financial performance, and glowing recommendations from analysts. Price-wise, RIVN is trading above its 52-week low of $11.68. Its 14-day RSI indicates that the stock is moving up toward oversold territory, giving optimistic investors another reason and plenty of chances to buy into the company at discounted prices – while they still can.
Li Auto (LI)
Despite the market slump, there are still a few strong contenders for buy-rated EV stocks, and Li Auto (NASDAQ:LI) is one of them. The company is a Chinese NEV (new energy vehicle) manufacturer best known for its Li ONE hybrid sports utility vehicle line. LI also offers accessories and service-related products like charging stalls and extended warranties through its various subsidiaries.
While LI has not yet expressed interest in expanding outside of China, the company is doing exceptionally well in its territory. According to the China Passenger Car Association, Li Auto outsold Tesla’s China division by almost 12,000 units (41%) in October 2023. Overall units sold in Q3 also went from 26,500 to over 105,000—a 296.3% growth YoY. Analysts are optimistic about LI’s prospects, with some stock price projections going as high as $62. Meanwhile, RSI is at the 50s level; more conservative investors might want to wait for lower prices before buying this EV stock.
ON Semiconductor (ON)
While not producing electric vehicles, ON Semiconductor (NASDAQ:ON) is a notable player in the industry and an excellent potential EV stock to buy. The company is a long-standing supplier for automotive companies, offering everything from EV semiconductors to camera and sensor chips.
Earlier this year, ON announced it’s considering investing an additional $2 billion in silicon carbide (SiC) chip production. More recently, the company officially opened its new S5 Line fabrication facility in Bucheon, South Korea, that can produce 1 million 200mm SiC wafers annually. Despite being harder and more expensive to produce, SiC chips have lower resistivity and better conduction than regular silicon, so industry experts are touting it as the future of EV chips. With its additional investments and the new S5 Line, ON is in a great position to capitalize on the predicted increase in SiC demands.
Investors who want to buy EV stocks might want to look at ON. The company has seen modest EPS growth over the past year, with the last quarter beating forecasts by 2.96%. Analysts recommend ON as a Strong Buy, with price estimates reaching up to $135 in the next 12 months—more than double its current price.
On the date of publication, Rick Orford 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.
