Due to climate concerns, governments worldwide are lending greater importance to emission control initiatives. Consequently, the electric vehicles (EVs) market is growing quickly. President Biden’s infrastructure bill proposal, which is expected to be passed imminently, has a $7.5 billion provision for EV charging networks. Furthermore, the EV-related proposals in the spending plan also include more than $100 billion in tax credits, which could slash EV prices and boost demand for them. The global EV market is expected to reach $917.70 billion in 2028, growing at a 20.6% CAGR.
EV giant Tesla, Inc. (TSLA) has attracted enviable investor attention of late, which has driven the stock to trade at an expensive valuation. Its 200.78 forward non-GAAP P/E ratio is currently 1,167.7% higher than the 15.84 industry average. And in terms of forward Price/Sales multiple, TSLA is trading 1,802.6% above the 1.27 industry average. In addition, for its third fiscal quarter, ended September 30, TSLA’s total cost of revenue increased 50.5% year-over-year to $10.1 billion, while its total operating expenses rose 32.1% from the same period last year to $1.66 billion. And its $835.53 12-month median price target indicates a 32.1% potential downside.
Therefore, we think EV stocks NIO Inc. (NIO), Li Auto Inc. (LI), and Workhorse Group Inc. (WKHS) could be better bets than TSLA to capitalize on the industry tailwinds. These stocks possess solid upsides based on the Street's predictions.
Click here to checkout our Electric Vehicle Industry Report for 2021
NIO Inc. (NIO)
NIO is a manufacturer and seller of smart electric vehicles in China. The Jiading, China-based company offers electric SUVs and sedans, and provides energy and service packages to customers.
On September 7, NIO announced that it had filed a prospectus supplement to sell$2 billion of its American Depositary Shares (ADSs) through an at-the-market equity offering. The company intends to use the proceeds from the transaction to strengthen its balance sheet and for general corporate purposes.
For the second fiscal quarter, ended June 30, NIO’s total revenues increased 127.2% year-over-year to $1.31 billion. This can be attributed to a 127% rise in vehicle sales from the prior-year quarter to $1.23 billion. Its gross profits improved 402.6% from the same period last year to $243.77 million.
A $0.01 consensus EPS estimate for the current quarter (ending December 2021) indicates a 106.2% year-over-year increase. Likewise, the $1.73 billion consensus revenue estimate for the current quarter reflects a 69.1% improvement from the prior-year quarter.
The stock has gained 14.4% in price over the past year and 29.1% over the past month to close yesterday’s trading session at $43.12.
Of the 10 Wall Street analysts that rated NIO, nine have rated it Buy, while one has rated it Hold. The $59.91 12-month median price target indicates a 38.9% upside potential. The price targets range from a low of $45.00 to a high of $72.00.
Li Auto Inc. (LI)
LI operates as a designer, developer, and manufacturer of smart electric sport utility vehicles (SUVs) in China. Its offerings include Li ONE, a six-seat electric SUV. The company is headquartered in Beijing, China. LI began trading on The Stock Exchange of Hong Kong Limited (HKEX) in August.
The company plans to launch a full-size, extended-range electric SUV in 2022 and two other SUVs on its X platform in 2023. These launches will enhance the company’s product portfolio.
LI’s total revenues increased 158.8% year-over-year to $780.44 million in its second fiscal quarter, ended June 30. Its gross profit rose 266.9% from the prior-year quarter to $147.57 million. Its cash, cash equivalents, and restricted cash came in at $2.14 billion, up 1,143.3% from the same period last year.
The Street’s $0.05 EPS estimate for the next year (fiscal 2022) reflects a 145.5% rise from the current year. Similarly, the Street’s $6.23 billion revenue estimate for the coming year indicates a 65.3% year-over-year rise.
LI’s stock has gained 26.3% over the past year to close yesterday’s trading session at $31.96. It has gained 10.9% in price year-to-date.
Of the six Wall Street analysts that rated LI, five have rated it Buy, while one has rated it Hold. The $39.88 12-month median price target reflects a 24.8% upside potential. The price targets range from a low of $32.00 to a high of $44.00.
Workhorse Group Inc. (WKHS)
WKHS manufactures battery-electric vehicles and aircraft and provides mobility solutions to the commercial transportation sector. The Loveland, Ohio-based company also offers cloud-based and real-time telematics performance monitoring systems.
On August 31, WKHS collaborated with fleet maintenance provider Amerit Fleet Solutions to provide warranty and repair services for WKHS’s customers and jointly provide maintenance solutions. The agreement should enable the company to provide a customized EV experience to its customers.
Also in August, WKHS entered a pilot program with the Natural resources Conservation Service (NRCS) to provide Unmanned Aerial Systems (UAS). Regarding this agreement, Workhorse President – Aerospace John Graber said, “Engaging in this pilot agreement with the NRCS is the first step in expanding our footprint beyond package delivery and the last mile delivery space.”
For its fiscal second quarter, ended June 30, WKHS’s net sales increased 1,208.3% year-over-year to $1.20 million. Its cash equivalents balance came in at $156.61 million for the six months ended June 30, up 497.8% from the same period last year.
The Street expects the company’s revenue to increase 179.1% year-over-year to $1.82 million in the current quarter (ending December 2021).
The stock has gained 4.2% in price over the past month and 7.6% over the past five days to close yesterday’s trading session at $7.22.
Of the four Wall Street analysts rating WKHS, two have rated it Buy, while the other two rated it Hold. The 12-month median price target of $11.75 indicates a 62.7% potential upside. The price targets range from a low of $7.50 to a high of $18.00.
Click here to checkout our Electric Vehicle Industry Report for 2021
TSLA shares were trading at $1,222.09 per share on Friday afternoon, down $7.82 (-0.64%). Year-to-date, TSLA has gained 73.18%, versus a 26.54% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.
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