To combat rising oil prices and meet climate goals, governments incentivize EV adoption. While pricey, EVs offer long-term savings. The electric vehicle future is clear, but adoption remains low. Governments offer incentives, creating high demand for EVs and charging networks.
We’ve seen Tesla’s (NASDAQ:TSLA) success, and other EV companies are thriving. Most stocks in the EV sector appear to be pricey (to say the least) right now. However, these three look undervalued on a relative basis right now.
Lithium Americas (LAC)
Lithium Americas (NYSE:LAC) is a key player in the EV industry, ensuring sufficient battery supply. Despite a 35% drop in the past year, LAC stock presents a favorable opportunity.
The Thacker Pass project, with an after-tax net present value of $5.7 billion and potential $2 billion EBITDA, holds immense promise. When the project launches, it’s expected to drive substantial value and upward momentum for the stock.
However, this presents an excellent chance for potential multibagger returns. Shareholders have approved a company split into Lithium Americas (North America assets) and Lithium Argentina (Argentina asset). This split is expected to unlock value in the near future.
Over four decades, Lithium Americas has amassed untapped long-term value. As Thacker Pass begins generating substantial cash flow, the company’s future looks promising. Holding LAC stock appears wise and potentially lucrative.
Li Auto (LI)
Li Auto (NASDAQ:LI) stands out as a top EV stock choice. Despite challenges like inflation and supply chain disruptions, LI stock maintains steady performance.
With a 229.7% revenue increase to $3.86 billion in the recent quarter and a healthy $1.33 billion in free cash flow, the company demonstrates strong financial growth. Additionally, it holds $10.17 billion in cash, ensuring liquidity for expansion and innovation.
If EU issues cause LI stock to drop, consider buying. Experienced investors adopt a “this too shall pass” mindset during crises. Li Auto’s success isn’t solely reliant on the EU. In August 2023, they delivered 34,914 EVs, a remarkable 663.8% year over year (YOY) increase.
In August, Chinese EV makers, including Li Auto, performed admirably. LI delivered 208,165 total vehicles by August, showcasing its strong performance. While European expansion is an option, it’s not essential for this thriving company.
Byd Co. (BYDDF)
BYD Company (OTCMKTS:BYDDF) stock, up 12% in the past year, still offers value with a low forward P/E ratio.
They acquired Jabil‘s mobility business in China, enhancing their electric component presence. In August, BYD set a sales record, aiming for 3 million vehicles this year, excelling in China.
BYD teamed up with Itochu in 2020 to recycle EV batteries into energy storage, tackling China’s waste issue. It leads in China’s EV market, invests $1 billion in India. Also, it enjoys strong sales with a Goldman Sachs “buy” rating, representing a promising bet on Chinese EV growth.
BYD Co. hits 5 million NEVs, indicating strong demand and global expansion. Additionally, it is investing in a Thai factory and expanding vehicle offerings. With rising EV demand, BYD is poised for significant growth in the global market, trading at $31, up 22% year to date (YTD), nearing its 52-week high of $36.
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.
