Which EV Stock is Best to Buy?

Which EV Stock is Best to Buy?

Everyone knows by now, that traditional ICE vehicles are on their way out, driven fast to obsolescence by electric vehicles (EVs).

In fact, according to Needham cleantech analyst Vikram Bagri, EV adoption is “advancing faster than expected.” Realistically, this is a big deal with the macro background.

“The fundamental landscape for EVs is more favorable than ever with rising gas prices, government support, and improved availability,” Bagri noted. “While we expect some short-term volatility as gas prices change, there is a regulatory and demand-driven path toward EV adoption.”

By 2030, forecasts for EV penetration in the US from IEA, BCG, and BNEF range from 44% to 53%. Individual OEMs are expecting a much faster rate of adoption with many automakers setting their sights on 100% EV sales by 2030 or 2035.

Adoption offers plenty of opportunities for public companies operating in the space, and this is an opportunity for investors.

Bagri and his team have been assessing the prospects of several EV manufacturers and have – in their view – separated the industry’s wheat from the chaff. Let’s take a closer look.

Fisker Inc. (FSR)

Elon Musk may be the world’s most famous EV entrepreneur, but Henrik Fisker hopes to give Musk a run for his money. The Fisker co-founder (the company was founded with his wife Geeta Gupta-Fisker) and CEO has an enviable record in the industry, having designed several luxury cars such as the Aston Martin DB9, BMW Z8, Aston Martin V8 Vantage, and the VLF Force 1 V10, among others.

Fisker turned its focus to EVs. The startup was founded in 2016 and Fisker plans to take a share of the EV market by mass-producing vehicles that are sustainably made as well as reliable and affordable.

The first vehicle off the production line is the Fisker Ocean, an electric sport utility vehicle (SUV). SUVs account for about half of all passenger vehicles sold in the US and EU, making the SUV market the largest segment in the passenger vehicle category.

Official production will begin in mid-November and the car will be assembled by Magna, the 4th largest supplier in the automotive industry. Having rolled off 3.7 million vehicles from its production lines, Magna’s experience will come in handy, with Needham’s Bagri noting that “this not only reduces execution risk and time to market but also means higher margins to early in the cycle”.

Competitively priced, with prices starting under $40,000, it should be followed by the Fisker Ocean PEAR, which is expected to launch in 2H24 and will be at a lower $30,000 price point.

Explaining why he sees a bright future for this industry player, Bagri said, “FSR is entering the EV market with SUVs that have cutting-edge technology at an affordable price, which presents a huge opportunity for the company. In addition, FSR aims to achieve a dominant position without significant capital outlays through contract manufacturing agreements with the largest and most reputable companies.”

“Furthermore,” the analyst went on to add, “the popularity of SUVs may make our FSR estimates too conservative, as SUVs account for ~45% to >50% of total car sales in the EU and the US respectively. If those ratios are sustained, ~10mm vehicles sold in the US and EU in 2030 should be EV SUVs, putting FSR’s share at ~5% of the EV SUV market.”

Accordingly, Bagri initiated coverage of FSR with a Buy rating and a $12 price target, suggesting the stock could see 34% growth for the next year. (To view Bagri’s track record, Click here)

Overall, FSR has a Moderate Buy rating from analyst consensus, based on 8 reviews that break down to 5 Buys, 2 Holds, and 1 Sell. The average price target stands at $13.50, suggesting shares will climb 51% higher over the one-year time frame. (See FSR stock forecast on TipRanks)

Rivian Automotive (RIVN)

Rivian made a big splash by entering the public markets last November. Armed with a large-scale IPO, backed by Amazon and Ford, the company set up a stall to become a major competitor to EV king Tesla with the promise of high-end electric trucks and SUVs.

At the end of last year, Rivian unveiled its premium electric truck – the R1T – and later this year it should begin deliveries of the R1S, an SUV based on the same platform.

However, ramping production is a bit of a nightmare for Rivian. The company faced a flurry of production issues earlier this year, which ranged from chip shortages to Covid-related problems to vehicle line rescheduling. These not only affected production but also adversely affected investor sentiment.

The mood has improved recently and the headwinds are also decreasing. In the July Q2 report, the EV maker revealed that it delivered 4,467 vehicles in the quarter, slightly above the Street’s expected 3,500 deliveries. Further boosting confidence, Rivian said it is still on track to hit its production target of 25,000 for the year. As of June 2022, the company had 98,000 total net bookings in the US and Canada for the R1 line.

With Rivian’s offerings boasting “sports car performance and pickup ruggedness,” Bagri thinks it has what it takes to attract early Regulation adopters “looking for something unique.”

From an investment perspective, however, there are currently too many issues that prevent the analyst from fully backing this name.

“The overall valuation looks… While RIVN is in a strong position, we believe competition will become intense, profitability is still a long way off, manufacturing challenges remain, and the company will require additional capital in 2024 and beyond,” Bagri explained.

To that end, Bagri’s coverage starts with a Hold (ie neutral) rating and no fixed price target.

While 4 other analysts bully Bagri and 1 recommend heading for the hills, 8 other reviews are positive, all with a Moderate Buy consensus rating. The average price target calls for one-year gains of 22%, given that the average target clocks in at $49.15. (See RIVN stock forecast on TipRanks)

Lucid Group (LCDD)

Tesla now makes another appearance with the introduction of Lucid. Helmed by ex-Tesla engineer Peter Rawlinson, this EV maker is another company eyeing Musk and Co.’s crown. to steal

Lucid’s ace is the Lucid Air electric sedan which it claims is “the world’s longest-lasting, fastest-charging electric luxury car.”

That’s not just hyperbole. Rawlinson led the engineering of the Model S but has improved its performance with the Lucid Air. The Tesla Model S has a range of 375 miles to 405 miles but the entry-level Lucid Air Pure has 406 miles of range, which climbs to the official EPA range of 520 miles with the Lucid Air Dream Edition R.

The vehicle has received widespread acclaim, having won several awards, including MotorTrend’s 2021 ‘Car of the Year’ award.

So, very promising, then. However, like many others, Lucid has been hit hard by the adverse macro conditions with supply chain snags and logistics issues individually affecting production. For example, the company had hoped to produce 20,000 vehicles in 2022, but that was then lowered to around 13,000, which was further reduced to between 6,000-7,000.

Additionally, it has been noted that the Air’s level of software proficiency is not as high as that of other EVs. This, along with other issues, informs Bagri’s bearish take.

“We consider LCID Underperformance [i.e. Sell] due to suboptimal software, possible manufacturing speed bumps and premium valuation. We believe that the software development and manufacturing ramp-up could face more snags due to a high-profile departure from the company. We are modeling production in ’23-24 to be ~20% below the agreement. Finally, in our coverage, LCID is the company that requires the most outside capital and soon, which could create excess equity trees,” wrote bearish.

Overall, the current market view of LCID is a mixed bag, reflecting uncertainty about its prospects. The stock has a Hold analyst consensus based on 2 Buys and 1 Hold and a Sell, each. However, the $21.67 price target suggests a ~34% upside potential from the current share price. (See LCID stock forecast on TipRanks)

Base line

Of the three EV names outlined in this piece, Wall Street expects the biggest gains from Fisker stock in the coming year.

For good ideas on trading EV stocks at attractive valuations, visit TipRanks’ Best Stocks to Buya newly launched tool that unifies all TipRanks equity insights.

Disclaimer: The opinions expressed in this article are solely those of the analyst in question. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

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