Many electric vehicle (EV) stocks soared during the growth and meme stock buying frenzy in 2021. But in 2022 and 2023, many of those stocks fell as their growth cooled and rising interest rates sent their buzzing valuations tumbling. The soft Chinese economy and a price war for electric cars exacerbated that pressure.
But with interest rates set to fall, some of those beaten-down EV stocks are starting to look like undervalued growth scenarios. Let’s examine three of those stocks — Nio (NYSE: NIO), Li Auto(NASDAQ: LI)And Joby Aviation(NYSE: JOBY) — and see why they’re worth nibbling on this November.
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Nio is a Chinese EV maker that produces electric sedans and SUVs. It differentiates itself from its competitors with batteries that can be quickly swapped at its swapping stations, as a faster alternative to traditional chargers.
Nio delivered its first vehicles in 2018. From 2019 to 2023, annual deliveries increased almost eightfold, from 20,565 to 160,038 vehicles. Annual revenue grew at a compound annual growth rate (CAGR) of 63%. However, growth slowed in 2022 and 2023 as it grappled with supply chain constraints, weather-related disruptions, macro challenges in China and the ongoing price war in the EV market.
That slowdown spooked the bulls, but Nio’s deliveries rose 36% year-over-year in the first nine months of 2024 – compared to 33% year-over-year growth in the first nine months of 2023. Vehicle margins stabilized it also grew its market share, sold a greater mix of premium vehicles and introduced its cheaper Onvo smart vehicles in China. It is also expanding into Europe, but those plans could be curbed by the new tariffs on Chinese electric vehicles.
But despite that pressure, analysts expect Nio’s revenue to grow at a CAGR of 28% between 2023 and 2026. It’s not yet profitable, but the shares appear undervalued by less than one times next year’s sales. It could ultimately achieve a much higher valuation if it overcomes near-term challenges.
Li Auto is one of China’s largest manufacturers of plug-in hybrid electric vehicles (PHEVs). It sells four models of plug-in hybrid SUVs (the L6, L7, L8 and L9) and launched its first all-battery electric minivan, the Li Mega, earlier this year.
Li started delivering its first vehicles at the end of 2019. From 2020 to 2023, annual deliveries increased more than eleven times, from 32,624 to 376,030 vehicles. From 2020 to 2023, sales increased at a CAGR of 136%. It also became profitable for the first time in 2023.
Li’s profits even grew as it built a massive network of charging stations across China. At the end of the last quarter, the company operated 894 super charging stations with 4,286 charging stations. It also operated 479 stores in 145 cities.
Li faces headwinds in the short term. The price war in the EV market is putting pressure on vehicle margins, while escalating trade tensions and new tariffs forced the country to postpone its first overseas expansion into the US, Middle East and other overseas markets.
But from 2023 to 2026, analysts expect Li’s revenue to grow at a CAGR of 25%, while net income will grow at a CAGR of 15%. Those are great growth numbers for a stock that trades at just 17 times forward earnings and less than 1 times next year’s sales. Like Nio, Li could receive a much higher valuation if the electric car price war cools, the Chinese economy stabilizes and economies of scale continue to reduce operating costs.
Joby Aviation develops electric vertical take-off and landing aircraft (eVTOL). The first commercial eVTOL aircraft, the S4, carries one pilot and four passengers, travels up to 100 miles on a single charge and has a maximum speed of 200 miles per hour. It is primarily designed as a cheaper, faster, quieter and greener alternative to traditional helicopters. It is also easier to land in urban areas, making it well suited for local air taxi services.
Joby currently has a $131 million contract with the U.S. Department of Defense (DOD) to supply up to nine eVTOL aircraft to the U.S. Air Force. Last year it delivered its first aircraft to Edwards AFB, and it plans to deliver the next two aircraft to MacDill AFB in 2025. It is also developing a hydrogen eVTOL aircraft, which could potentially have five times the range of its first-generation battery. -powered counterparts.
Joby is still a highly speculative stock. Analysts expect it to generate just $395,000 in revenue this year, while posting a net loss of $467 million. But by 2026, they expect the company to generate $104 million in revenue, with a net loss of $532 million.
Based on these expectations and its $3.56 billion enterprise value, Joby’s shares aren’t very expensive, at seven times projected 2026 revenue. Toyota And Delta Airlines Joby’s future is still heavily invested in, so the stock price could rise much higher as more companies replace their helicopters with their eVTOL aircraft.
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Leo Sun has no position in any of the stocks mentioned. The Motley Fool recommends Delta Air Lines. The Motley Fool has a disclosure policy.
3 Top EV Stocks to Buy in November was originally published by The Motley Fool
