Most stock charts continue to look impaired due to inflation and recession concerns and certain EV stocks show similar patterns. Investors are tasked with deciding how much of their portfolio they want to bet on more speculative high-growth areas of the market. And indeed, it’s difficult to find EV stocks with strong fundamentals and technicals. So which are the essential EV stocks for the forward-thinking investor to consider?
Just a few short years ago, electric vehicles were seen as luxury items or niche transportation. Now, with around 3 million EVs in the U.S. alone, investing in EV-related stocks is appealing. My recommendations below are companies focused more on the back-end production and supply production of batteries, or the front-end charging technology needed to power the entire sector.
Albemarle (ALB)
Albemarle (NYSE:ALB) is a prime lithium stock for long-term investment. With a 35% correction in the past year, its P/E ratio of 7.2-times is enticing. Despite the dip due to lower lithium prices, ALB’s future prospects in the growing lithium market are promising.
Mining stocks such as Albemarle offer a low-risk route to benefit from the EV sector, regardless of the leading manufacturer. And certainly, being a U.S. company adds to its appeal. Albemarle secured $150 million from the U.S. DOE through the 2022 Infrastructure.
Albemarle is primed to benefit from industry growth, targeting 20-30% CAGR in lithium sales through 2027. This predicts revenue and cash flow growth, with projected operating cash flow of $1.5 billion this year, potentially reaching $2.5 billion in two years. The company’s strong finances support capital investments and dividend expansion.
ChargePoint (CHPT)
Consider ChargePoint Holdings (NYSE:CHPT). Despite the chart, its future looks bright. Wood Mackenzie forecasts a four-fold rise in U.S. charging ports to 18 million by 2027. CHPT, with a 46% market share, dominates EV charging. Despite losses, its network doubled lately, and CHPT holds potential as EV adoption soars.
With ample room for EV charging industry expansion, ChargePoint’s Q1 2024 revealed impressive 59% year-over-year revenue growth to $130m. Notably, GAAP gross margin also expanded by 800 basis points to 23%. As the charging network grows, recurring revenue will bolster EBITDA margin.
Additionally, announced on August 2, the firm plans to reduce its EBITDA loss by two-thirds in Q4. Despite the optimistic outlook, the stock faced a dip due to a Q2 guide below expectations. However, analysts suggest this reaction was exaggerated. Moreover, CHPT’s strong presence in the U.S. and Europe is noteworthy.
Lithium Americas (LAC)
Lithium Americas (NYSE:LAC) offers a valuable proposition with its Thacker Pass project’s $5.7B after-tax NPV and Cauchari-Olaroz asset. A promising rally is anticipated due to its undervaluation.
Upon asset production, Lithium Americas will generate strong cash flow. Long-term lithium price growth is anticipated, further bolstering cash flow. Shareholder-approved split into North America and Argentina-focused entities is likely to unlock value.
Shareholders have greenlit the division of North American and Argentina assets into separate entities, fostering future value release. The Thacker Pass project established a significant deal with General Motors (NYSE:GM) involving a $650 million investment. The binding supply agreement secures GM’s access to 100% of phase one lithium carbonate from Thacker Pass. This ensures clear revenue visibility upon production.
On the date of publication, Chris MacDonald 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.
