Electric vehicle stocks are certainly facing a bit of a difficult overall environment at the moment. That said, there remains plenty of reason to invest at this time. Let’s start with the bad and then move into the reasons that you should consider buying anyway as 2023 winds down.
EV manufacturers have slashed prices and inventories are building up. The higher cost of EVs relative to their internal combustion counterparts continues to be a problem.
Yet, there are plenty of reasons to believe in EVs. For example, research done by Ernst & Young shows that nearly half of all respondents who plan to buy a vehicle In the next 2 years intend to purchase an electric vehicle. Demand remains strong and that means that these stocks also have strong prospects moving forward.
Electric Vehicle Stocks to Buy: Toyota (TM)
Toyota (NYSE:TM) is approaching the pivot into vehicle electrification with the same pragmatic process that it approaches everything. What I mean is this: Toyota is known to build incredibly reliable vehicles that are also very long lasting. The reason its vehicles last so long is that the company prioritizes a slow iterative process to developments and upgrades that focuses on engineering that, while not technologically at the vanguard, is pragmatic and dependable.
The company essentially doesn’t rush into anything. Instead, Toyota finds what works and implements that technology into their vehicles again and again. America’s big three automotive manufacturers have rushed into EV production in order to catch up to other leading manufacturers like Tesla (NASDAQ:TSLA).
But Toyota is taking the middle road as it always does. So, instead of primarily full vehicle electrification, the company is instead focusing on hybridization. The company has been building extremely reliable hybrid vehicles for decades. My strong assumption is that Toyota’s engineers understand how to build reliable EVs due to the data they have gathered from those hybrid vehicles. So, if they decide to move to a more fully EV approach, my assumption is that they have all the requisite data to successfully do so.
Investing in the stock will be like buying one of its vehicles: nothing flashy or sexy, but instead, a very reliable and sensible investment overall. Toyota easily earned its spot on our list of electric vehicle stocks.
Albemarle (ALB)
Investing in Albemarle (NYSE:ALB) arguably gives you your best shot for Rapid returns from any EV stock.
The lithium producer is known to be very volatile and carries a relatively high beta of 1.67. That’s what it means to invest in commodities stocks.
So, as long as you believe that EV production has a strong future, Albemarle continues to make a lot of sense. Essentially, investors have to take the opportunity of the company’s low priced shares, and make a bet.
The electric vehicle Market is oversupplied with lithium. further, there is an expectation that oversupply will continue for some time. undoubtedly, that will affect prices negatively.
However, Albemarle is one of the United States’ leading producers of lithium. The company has established a strong position within the supply chain that will endure. The company recently received a $90 million grant from the Department of Defense. It has essentially been earmarked as a producer of critical materials.
Beyond that, there’s a case to be made that Albemarle isn’t even that weak at the moment. In the most recent quarter sales increased by 10%, and the company expects to increase sales between 30 to 35% by the end of this year relative to last year.
ON Semiconductor (ON)
I believe ON Semiconductor (NASDAQ:ON) continues to be unfairly maligned due to recent market factors. The company has become the de facto EV chip stock for general investors. I think it will continue to be and I think there’s a strong contrarian narrative emerging around it right now.
Per usual, the market is all about forward-looking sentiment. so, ON semiconductor’s soft outlook for the fourth quarter has the market worried. Earnings and revenue projections are not where analysts would like them to be.
Ignore them. The company just released third-quarter earnings and bested both revenue and earnings expectations. The market punished the company anyway. Investors should remember that ON Semiconductor is the leading chip provider to electric vehicle manufacturers. An EV requires 14 times as many chips as a regular internal combustion vehicle does. ON Semiconductor provides those chips. The EV Market is facing issues right now but the future outlook remains strong and that means future growth for the company. Buy the shares of this and the other electric vehicle stocks while they’re cheap.
On the date of publication, Alex Sirois 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.
