EV stocks have become a polarizing topic among investors. Some investors are convinced that EVs are the end-all-be-all of transportation for the future. On the other hand, some are doubtful of the true extent of EVs and still hold short-term sentiments against them. Nonetheless, EVs offer a way for the world to relinquish our reliance on fossil fuels finally. They are also the gateway to the intersection of computers and vehicles. For the EV industry, this often means robo taxis via autonomous driving technology or charging applications and digital services.
However, as we have seen over the past year, interest rates, inflation and the overall macroeconomic environment heavily impact EV stocks. Additionally, pure-play EVs are consumer products and are still susceptible to the volatility of consumer trends. While all of this has contributed to the EV industry now being in a hull, here are three EV stocks to buy before the market makes its inevitable rebound.
Tesla (TSLA)
Tesla (NASDAQ:TSLA) headlining this article should be no surprise to anyone researching the EV industry. It is currently the twelfth-largest company in the world by market cap. It remains a divisive stock on Wall Street, with analyst price targets ranging from $21.30 to $298.14. The current price of $181.19 is about 10% higher than the average price target of $167.09.
Although it saw a bounce following its recent earnings call, Tesla remains the worst-performing mega-cap stock in 2024. CEO Elon Musk is seemingly going all in on the Cybercab autonomous taxi, which will be unveiled in August. It has also received preliminary approval to test its FSD technology in China, the largest automotive market in the world. To top off these potential catalysts, its mass-market Model 2 is also alleged to begin production in 2025. Now, investors are waiting for Tesla to execute these potential developments perfectly or risk losing further shareholder support.
The pullback has reduced the stock to trading at just 6.6x sales: one of the lowest multiples since it went public. Yet, despite all the headlines about declining margins and sales, Tesla’s 10-year revenue CAGR is still sitting at 47%. While this stock does have its fair share of risks, it’s now or never to buy the dip of Tesla before it hits another hyper-growth cycle over the next few years.
Rivian (RIVN)
Rivian (NASDAQ:RIVN) is an American EV maker that has found its niche in the EV market with electric SUVs and pickup trucks. Large companies, including Amazon (NASDAQ:AMZN) and AT&T (NYSE:T), rely on its distribution of electric vans for deliveries and customer service. Yahoo Finance analysts project a one-year price range between $9 to $36, and the median analyst target of $16.84 indicates some potential upside for Rivian.
Since Rivian went public in November 2021, it has met with unfair expectations and comparisons with Tesla. The stock went parabolic after its IPO but has lost more than 90% of its price. Nonetheless, Rivian is currently focusing on its long-awaited mass-market vehicle models: the R2, the R3 and the R3X. These will go head-to-head with Tesla’s Model Y when released in 2026.
As expected, Rivian is trading at its lowest-ever price multiple at just 2.1x sales. In the same quarter in 2023, RIVN was trading at 8.5x sales. As new models hit 2026 and Rivian works to continue reducing its losses and increasing its sales, the risk-reward to the upside couldn’t be clearer at this rock-bottom price.
Li Auto (LI)
Li Auto (NASDAQ:LI) is a leading EV maker selling premium smart electric vehicles in China’s growing energy vehicle market. Wall Street analysts project a one-year price target range of $25 and $68. The average price target of $47.98 is nearly 40% higher than the current price.
This stock is often grouped with other Chinese EV makers like XPeng (NYSE:XPEV) and Nio (NYSE:NIO). The difference is that Li has been profitable this year and focuses on EVs and electric hybrids. Its EREV technology allows some of its vehicles to have a range of more than 800 miles per charge. On top of that, Li has higher gross margins than even Tesla.
Like Tesla and Rivian, Li trades at its lowest price multiples as a public company. Shares are currently trading at 1.7x sales and 20x forward earnings. Given that the EV sector is mainly centered around China, Li Auto sets itself apart as a more unknown company to U.S. investors with the opportunity to become one of the biggest players.
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.
