Analysts see major opportunities in EV and battery stocks.
Electric vehicle stocks once again accounted for some of the hottest initial public offerings and top stock market performances in 2021. Investors see disruption of the global auto industry as a massive, inevitable economic shift and are getting in early by investing in EV companies and battery manufacturers to ride the long-term EV wave. The global EV market is expected to grow by 24.3% annually from $287.4 billion in 2021 to $1.3 trillion in 2028, according to a report by Fortune Business Insights. Here are nine of the top battery and EV stocks to buy today, according to Bank of America analysts.
Lucid Group Inc. (ticker: LCID)
Lucid is an EV pure-play stock. Bank of America analyst John Murphy says technology is one of Lucid's primary advantages over other EV startups. Lucid's innovative electric powertrain tech, its attractive first model and its valuable Lucid brand make the stock a top-tier investment among EV startups. Lucid has repeatedly demonstrated it has access to capital, and Murphy says its experienced management team should successfully transition the company from concept to commercialization. Murphy says recent weakness in Lucid shares is a buying opportunity. Bank of America has a "buy" rating and a $60 price target for LCID stock, which closed at $36.97 on Dec. 29.
Nio Inc. (NIO)
Investing in Chinese stocks is not for the faint of heart these days. Chinese regulators are cracking down on tech companies, while U.S. regulators are threatening to delist Chinese stocks that do not comply with rigorous new accounting standards. But many analysts and investors see the potential of the Chinese EV as too attractive to resist. Analyst Ming Hsun Lee says Nio's brand is growing rapidly in China, and its regular launches of new models and updates have facilitated its market share gains. Bank of America has a "buy" rating and a $65 target for NIO stock, which closed at $28.25 on Dec. 29.
XPeng Inc. (XPEV)
XPeng is a Chinese EV startup targeting the midlevel and high-end segments of the market. XPeng launched its G3 SUV in 2018 and its P7 sports sedan in 2020. Lee says XPeng's next model, the G9 SUV, compares to the Tesla Inc. (TSLA) Model Y. The G9 is expected to launch in the third quarter of 2022 and help boost XPeng's overall margins. Lee is bullish on XPeng and says the company has a powerful combination of a strong model pipeline and attractive autonomous driving technology. Bank of America has a "buy" rating and a $66 price target for XPEV stock, which closed at $44.47 on Dec. 29.
Li Auto Inc. (LI)
Li Auto is another leading Chinese EV maker that was the first company to sell an extended-range EV in China. The company's first model, the Li One, is a large SUV. In the third quarter. Li reported 25,000 vehicle deliveries, up 190% from a year ago and up 43% compared to the second quarter. Lee says strong pricing power for the One has supported margins. The company's Beijing factory is on track to begin production in 2023 and boost annual production capacity to at least 500,000 units. Bank of America has a "buy" rating and a $46 price target for LI stock, which closed at $29.42 on Dec. 29.
Rivian Automotive Inc. (RIVN)
Rivian Automotive designs and manufactures EVs. Rivian went public in November 2021 and began delivering its first R1T electric pickup trucks in December. After pricing its IPO shares at $78, Rivian's stock initially climbed as high as $179.47 in its opening weeks of trading before its mixed first earnings report in December sent the stock tumbling back to less than $100. Despite the negative market reaction, Murphy says there were several positives in the report, including 71,000 preorders for the R1T and R1S models. Bank of America has a "buy" rating and a $170 price target for RIVN stock, which closed at $99.34 on Dec. 29.
Proterra Inc. (PTRA)
Proterra produces electric commercial vehicles. Analyst Sherif El-Sabbahy says Proterra has a "tangible lead" in battery pack technology and has a steady source of income from its transit bus sales. El-Sabbahy says that type of stability is rare in the nascent EV space. As more of Proterra's battery pack partners bring products to market in coming years, Proterra's revenue growth should increase significantly. In fact, El-Sabbahy projects 24.7% sales growth in 2021, 73% sales growth in 2022 and 95.3% sales growth in 2023. Bank of America has a "buy" rating and a $15 price target for PTRA stock, which closed at $8.77 on Dec. 29.
General Motors Co. (GM)
U.S. automaker General Motors is a great way for value investors to play the EV trend. Most EV startups are trading at extremely high earnings and sales multiples, but GM shares trade at just 8.3 times forward earnings. Many popular EV stocks aren't profitable, but GM reported $2.42 billion in net income in the most recent quarter. Murphy says GM is leading the transition of the global auto industry, and most pieces of its future business are already in place. Bank of America has a "buy" rating and an $85 price target for GM stock, which closed at $57.23 on Dec. 29.
Freeport-McMoRan Inc. (FCX)
Freeport-McMoRan is one of the world's largest copper, gold and molybdenum miners. Bank of America has named Freeport as one of its top stock picks as a battery materials play, a critical part of the EV story in coming years. Analyst Lawson Winder projects 19.3% sales growth for Freeport in 2022. Winder says Freeport's recently announced $3 billion buyback program and its 30-cents-per-share special dividend program for 2022 is 275% higher than the $1.04 billion in capital returns he previously projected. Bank of America has a "buy" rating and a $43 price target for FCX stock, which closed at $41.98 on Dec. 29.
Teck Resources Ltd. (TECK)
Teck Resources is a mining and metals company focused on copper, metallurgical coal and zinc. Greenlight Capital's David Einhorn says it's impossible to predict winners and losers in the EV startup space at this stage. However, EVs utilize four times as much copper as internal combustion engine vehicles, which is good news for Teck. Winder says severe weather has temporarily disrupted Teck's logistics chain, but production has not been negatively affected. EV demand for copper could make Teck a top under-the-radar EV investment. Bank of America has a "buy" rating and a $35.38 price target for TECK stock, which closed at $28.60 on Dec. 29.
Top EV stocks and battery companies:
-- Lucid Group Inc. (LCID)
-- Nio Inc. (NIO)
-- XPeng Inc. (XPEV)
-- Li Auto Inc. (LI)
-- Rivian Automotive Inc. (RIVN)
-- Proterra Inc. (PTRA)
-- General Motors Co. (GM)
-- Freeport-McMoRan Inc. (FCX)
-- Teck Resources Ltd. (TECK)