Batteries are the lifeblood of the technology sector, powering everything from smartphones to electric vehicles. They are also the driving force behind the advancement of technology and the shift away from a reliance on fossil fuels. Of course, the batteries used in these new appliances are no longer the alkaline batteries from decades past. Lithium-ion batteries hold an immense amount of energy and are now the cornerstone that is powering the world’s most advanced devices. In fact, the global lithium-ion market in the U.S. is already valued at a whopping $44.5 billion and is expected to grow at a strong compound annual growth rate (CAGR) of 13.1% in the next 10 years.
So how can you invest in the battery sector? Despite being in many different industries, batteries all play a crucial role in all sorts of businesses. Here are three undervalued battery stocks to buy as the calendar flips over to June.
Tesla (TSLA)
Tesla (NASDAQ:TSLA) is the largest electric vehicle maker in the world by both market cap and annual sales. TSLA stock struggled this year, falling by nearly 30% as consumer sentiment continues to suffer with high interest rates and inflation. However, this hasn’t stopped Wall Street analysts from maintaining bullish price targets. The street-high target sits at a lofty $296.25, which is 60% higher than the current price.
The debate with Tesla is whether to value it as an automaker or a tech company. From its upcoming Cybercabs to Optimus Bot AI, Tesla is quite clearly more than just an automaker. In the battery space, Tesla is also rolling out exciting new developments including potential sodium-ion batteries that may be able to halve the costs of energy storage by lithium-ion provides. While this alternative is quite new, its cost-cutting implications would allow Tesla to continue its dominance in making EVs cheaper than traditional vehicles.
Shares of TSLA are trading at about 6.5x sales, which is a historically low level for the stock. If you prefer earnings, Tesla trades at 71x forward earnings which gives it a high-growth tech company valuation. It might not seem like it now, but Tesla is a company that will continue to change the world in the future. And when it does? Its stock has a lot of catching up to do.
NextEra Energy (NEE)
NextEra Energy (NYSE:NEE) is the world’s largest producer of both wind and solar energy and has become a leader in the renewable energy storage industry. As you might expect, Wall Street analysts are quick to provide bullish upgrades to the stock. The stock is currently trading slightly above its average price target of $74.59 and holds a high-end target of $102.80 representing a 30% upside.
Leading the way in the United States, NextEra has the most energy storage capacity in the country. It has more than 180 MW of battery storage where it stores excess energy to meet demand wherever needed. A core competitive moat coming from NEE’s sheer size is its ability to provide localized energy storage projects to nearby distribution systems, thereby creating more clean but also reliable energy.
Looking at its financials, we see NEE’s five-year revenue CAGR of 10% has also been accompanied by a roughly 57% stock price return. Valuation-wise, the stock trades at a reasonable 6x sales and 23.5x forward earnings. With the added benefit of a dividend committed to growing by 10% annually through 2026, investors should highly consider this company as a strong energy and battery investment.
Solid Power (SLDP)
Solid Power (NASDAQ:SLDP) is a solid-state battery maker that works with some of the largest original equipment manufacturers in the world. With a cheap price of just $1.77, SLDP is currently being eyed by Wall Street analysts for having the potential to reach a one-year price target offering between a 90% and 200% upside.
This company’s unique battery technology caught the eyes of some of the most influential companies around the world. For example, Solid Power already works directly with OEMs like Ford (NYSE:F), as well as an exclusive partnership with South Korea’s SK ON. Its recent quarterly results show positive progression in these partnerships, with with revenue growth of more than $2.2 million on a year-over-year basis.
The stock has been beaten down over the past couple of years. Shares of SLDP trade at 16x sales which is in a historically low range for the stock. However, when looking at revenue, we see a five-year CAGR of 49% indicating that Solid Power is still in its hyper-growth stage. For risk-tolerant investors, Solid Power remains one of the cheapest pure-play solid-state battery stocks on the market.
On the date of publication, Ian Hartana and Vayun Chugh 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.
