The International Energy Agency predicts that “installed battery capacity worldwide will increase tenfold to sixteenfold by 2030.” McKinsey believes that 120 to 150 new battery plants need to be built between 2023 and 2030 to meet the impending demand. If these estimates hold, battery stocks could see incredible upside.
Over the last few quarters, electric vehicle sales and stocks have been depressed. This has translated into a correction for some of the best battery stocks. However, considering the long-term growth potential, I believe that this correction is a good accumulation opportunity.
Of course, long-term industry headwinds do not imply that all stocks in the industry have multi-bagger potential. Investors need to be selective and look for companies that have an edge over peers from a fundamental perspective. That being said, here are three top battery stocks you may want to consider before they pivot higher.
Panasonic Holdings (PCRFY)
Panasonic Holdings (OTCMKTS:PCRFY) is my top pick among battery stocks to buy for multibagger returns. PCRFY stock trades at an attractive forward price-earnings ratio of 6.2 and offers a dividend yield of 2.38%. Once near-term headwinds for the EV industry wanes, I expect the stock to quickly double.
It’s worth noting that Panasonic has ambitious growth plans for its EV batter business. As compared to financial year 2023 levels, Panasonic expects to quadruple battery capacity to 200GWh by 2031. By the end of the decade, the Company plans to boost battery sales to 2.5 trillion yen. This is likely to be associated with EBITDA margin expansion.
Panasonic also continues to innovate, which gives the Company an edge. The Company expects to increase the volumetric energy density of EV batteries by 25% by 2031.
Solid-state batteries for drones and factory robots are also on the cards by 2029. With revenue growth, potential EBITDA margin expansion, and innovation, PCRFY stock promises to be a value creator.
Albemarle (ALB)
It’s expected that the global demand for Li-ion batteries will surge with the number of GWh required likely to increase from 700GWh in 2022 to 4.7TWh by 2030. While lithium prices have plunged, the long-term outlook is positive and it’s a good opportunity to accumulate lithium stocks. Albemarle (NYSE:ALB) stock looks undervalued after a meaningful correction. I would expect a strong reversal rally from current levels.
An important point to note is that Albemarle is working towards cost reduction and capital investment reduction. This is likely to unlock $750 million in cash flows in the near term. At the same time, the Company continues to guide lithium sales volume growth at a CAGR of 20% between 2022 and 2027.
Therefore, once the current headwinds wane, I expect renewed momentum in terms of sales growth, EBITDA margin expansion, and cash flow upside. With a net-debt-to-adjusted EBITDA of 1.1, there is ample financial flexibility to pursue growth investments when the industry outlook improves.
QuantumScape (QS)
QuantumScape (NYSE:QS) is a high-risk bet among battery stocks. However, if the Company can commercialize solid-state batteries, multi-bagger returns are likely. I further believe that QS stock has bottomed out around $6 levels and looks good for accumulation.
It’s worth noting that QuantumScape is still in the product development stage. A key positive is that the Company ended Q4 2023 with a cash buffer of $1 billion. QuantumScape expects cash runway to extend into the second half of 2026. The Company has been conservative in terms of cash utilization and no near-term dilution concerns are a big positive.
At the same time, business progress has been significant. This year, the Company is targeting its first commercial product, QSE-5 cell. Low volume production is likely this year with higher volumes in 2025. It’s worth mentioning here that Volkswagen (OTCMKTS:VWAGY) is a key automotive partners for the Company. With validation testing of A0 prototype cells delivering positive results, QuantumScape seems close to commercialization.
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.
