Are these 3 Electric Car Stocks still worth buying? Analyst Weighing In
Electric cars are growing in popularity, a trend fueled by social acceptance, the green mentality, and a recognition that the internal combustion engine has its flaws. Electric vehicles (EVs) address some of those shortcomings. They bring lower emissions, less pollution from the car, and the promise of high performance off the mark. Currently, the main disadvantages are the high cost and relatively short range of current battery technology. Even so, many consumers have decided that the benefits outweigh the costs, and EV sales are increasing. China, in particular, has long been known for its pollution and smog issues, and the government is actively pushing EVs as a potential mitigating factor. Additionally, EVs, with their fast acceleration and (usually) short range, are already in line with China’s overcrowded – growing urban centers. In a comprehensive review of the Chinese EV sector, Jefferies analyst Alexious Lee noted, “We are constructive on the outlook for NEV in China as the country pushes forward with the ‘electrification to digitization’ trend. While automakers JVs global rollout of new models of new energy saving vehicles (HEVs and PHEVs) to comply with top-down target to reduce annual Corporate Average Fuel Consumption (CAFC), automakers Chinese (both legacy and start-up businesses) are being urged to accelerate the adoption of BEV with entry- level, city and advanced commuter models at a premium. “Against this background, Lee has chosen one Chinese EV stock worth owning, and two that investors should avoid for the time being. We used the TipRanks database to find out what other Wall Street analysts have to say about these three prospects. Chinese EV company Li Auto (LI) Li Auto prides itself on having the best-selling single electric vehicle model in the country. The Li ONE sold 3,700 units this October, bringing the total volume sold in the first year of production to 22,000. At current sales and production rates, Li expects the company to double its annual sales number this year. That’s a big deal, in the world’s largest electric car market. China produces more than half of all EVs sold globally, and almost all electric buses. Li Auto, founded in 2015, has focused on plug-in hybrids – models that can plug into a charging station to maintain the battery, but also have a combustion engine to compensate for low-density charging networks. The Li ONE is a full-size hybrid SUV electric that has quickly gained popularity in its market. Li Auto went public on the NASDAQ in July 2020. At the IPO, the company started with a $ 11.50 share price, and closed the first day with a 40% gain. In the months since, LI has appreciated 116%. Those share gains come as the company reports strong earnings. In 3Q20, reported last quarter, LI showed US $ 363 million in sales, up 28% consecutively, and formed the lion’s share of the company’s US $ 369.8 million in total revenue. Also positively, Li reported a sequential increase of 149% in free cash flow, to US $ 110.4 million. Lee has been impressed by Li Auto’s technology, stating, “Li One’s EREV powertrain has proven to be a great success due to (1) extended range, (2) limited impact of low temperatures, (3) easier acceptance by car buyers. The advantage is sustainable ahead of battery cost parity, estimated in FY25 (LFP) and FY27 (NMC), making LI AUTO the automaker to turn OCF positive and profitable earlier against peers. “The analyst added,” LI AUTO is the first in China to successfully commercialize an extended-range electric vehicle (EREV) that answers driver concern and high BOM automakers. Powered by fuel, the ER system provides an alternative source of electricity in addition to battery packs, which is significantly excellent during a low transient environment where BEVs could lose up to 50% of the printed range. “Seeing the company’s technology as the key attraction for customers and investors, Lee began its coverage of LI with a Buy rating and a $ 44.50 price target. This figure suggests an upside growth of 25% in the coming year. ( To watch Lee’s history, click here) Wall Street has a broad agreement with Lee that this stock is a buyback offer. LI shares have a Firm Buy consensus rating, based on 6 reviews, including 5 Buy and 1 Hold. is $ 35.60 and the average price target of $ 44.18 is in line with Lee’s, which suggests 24% upside for the next 12 months. (See LI stock analysis on TipRanks) Nio (NIO) Where Li Auto has the single best-selling EV model in China, rival Nio is competing with Tesla Elon Musk for the highest shareholding spot in the Chinese EV Market with a $ 90 billion market cap, Nio is the China’s largest domestic electric car manufacturer.The company has a diverse line of products, including SUVs lithium-ion battery SUVs and water cooled electric motor sports car. There are two sedans and a minivan on the drawing boards for future release. Meanwhile, Nio vehicles are popular. The company reported 43,728 vehicles delivered in 2020, more than double the 2019 figure, and the last five months of the year saw an increase in car transportation for 5 straight months. December deliveries exceeded 7,000 vehicles. Nio’s revenues have been steadily rising, showing significant year-on-year gains in the second and third quarter of 2020. In Q2, earnings were 137%; in Q3, it was 150%. In absolute numbers, Q3 revenue hit $ 654 million. However, with shares rallying 1016% over the past 52 weeks, there is little room for further growth – at least according to Lee Jefferies. The analyst initiated coverage on NIO with a Hold rating and $ 60 price target. This figure implies a modest 3% upside. “We use the DCF method to price NIO. In our DCF model, we factor in solid volume growth, positive net profit from FY24 and positive FCF from FY23. We use WACC of 8.1% and a final growth rate of 5% and are reach the target $ US $ 60 price, “Lee explained. Overall, Nio has a Moderate Buy rating from the analyst consensus, with 13 reviews recorded, which includes 7 Buy and 6 Holdings. NIO is selling for $ 57.71, and recent share earnings have pushed that price slightly below the $ 57.79 average price target. (See Nio’s stock analysis on TipRanks) XPeng, Inc. (XPEV) XPeng is another company, like Li, in the mid-range price level of China’s electric car market. The company has two models in production, the G3 SUV and the P7 sedan. Both are long-range EV models, capable of driving 500 to 700 kilometers on a single charge, and have advanced auto-pilot systems for driver assistance. The G3 started deliveries in December 2018; the P7, in June 2020. In another comparison to Li Auto, XPeng also went public in US markets in the summer of 2020. The stock first performed on the NYSE on the last day of August, at a price of $ 23.10, and in the IPO the company raised $ 1.5 billion. Since the IPO, the stock is up 127% and the company has reached a market cap of $ 37.4 billion. Increased sales are behind the share gains. XPeng reported 8,578 vehicles shipped in Q3 2020, an increase of 265% from the year-ago quarter. The majority of those deliveries were P7 sedan – the model saw jump deliveries from 325 in Q2 to 6,210 in Q3. Strong sales translated into revenues of US $ 310 million for the quarter, a truly impressive 342% increase. Lee Jefferies sees XPeng as a well-positioned company that may have increased its short-term growth. He writes, “XPENG has a very strong exposure to technology-driven growth … While we favor its expertise in autonomous driving and power consumption efficiency, our FY21 forecast is of 120% sales growth is below consensus while our FY22 forecast is 129% higher. given slower market acceptance and increased competition in the Rmb200-300K segment. ”To this end, Lee rates XPEV and Hold and his $ 54.40 price target suggests a slight upside of ~ 4%. Recent gains in XPEV have pushed the price slightly above the $ 51.25 average price target; the stock is now selling for $ 52.46. This comes together with a Moderate Buy analyst consensus score, based on 8 reviews, analyzing to 5 Buy, 2 Holdings, and 1 Sell. (See XPEV stock analysis on TipRanks) To find good ideas for EV stocks trading at attractive valuations, visit TipRanks Best Stocks to Buy, a newly launched tool that unites all TipRanks equity insights. Disclaimer: The views expressed in this article are solely those of the analyst concerned. The content is intended for informational use only. It is very important to do your own analysis before making any investment.