Although market analysts often pound the table on electric vehicles, the harsh reality is that one must exercise discretion with EV stocks. Frankly, most of the upstart brands that you see today probably won’t be with us several years down the line. Here, it’s useful to take a quick history lesson.
Back during the early glory days of the automobile, a few brands made their mark, continuing their existence at the present juncture. But the others? Brands such as Auburn, Cole, Crow, Davis, Dixie, Durant, Elcar, Grant, King, Kline, Lafayette, Kurtz, Marmon, Mercer, Overland, Peerless, Pilot, Roamer, Saxon, Stearns, Velie, Wescott and Winton represent museum pieces. And so it will likely be with most EV stocks. That’s not necessarily to dissuade you from engaging in this otherwise exciting sector. However, you’ll want to direct more of your funds toward credible players. Below are the EV stocks that can truly go the distance.
As a pure-play idea among EV stocks, sector king Tesla (NASDAQ:TSLA) more than likely has the right stuff. To be sure, no company enjoys a guarantee of tomorrow. However, Tesla probably achieved a level of brand awareness that’s irreversible. According to data compiled by Statista.com, Tesla’s brand value reached a value of $76 billion last year, jumping around 78% compared to the prior year.
In full transparency, Tesla took a beating last year, underscoring the risks even with well-established EV stocks. Specifically, in the trailing year, TSLA gave up 42% of its equity value. Still, on a year-to-date basis, TSLA gained over 48%, reflecting tremendous resilience. Just as importantly, Wall Street analysts believe in Tesla despite recent troubles. Currently, market experts rate shares as a consensus moderate buy. Also, their average price target pings at $186, implying a potential upside of 16%. However, once the economy normalizes, this target may rapidly jump higher.
Lucid Group (LCID)
One of the EV stocks that I’ve frequently mentioned, Tesla competitor Lucid Group (NASDAQ:LCID) isn’t exactly having a great time right now. In the trailing year, LCID stock gave up nearly 69% of its equity value. At the time of this writing, LCID trades hands at $9 a pop. And that means shares trade lower than when it originally listed as a special purpose acquisition company ($10 a share). Still, among the upstart EV stocks, Lucid commands the most credible narrative. Fundamentally, management seeks to address the upper range of the income strata. Therefore, those seeking to buy a Lucid EV now will fork over at minimum six figures.
Now, this sounds widely out of touch with the rest of society. However, keep in mind that with an average price of $66,000, a new EV presents a huge expense for the median household. For now, Lucid won’t even bother with attempting to create a market through challenging economies of scale. Instead, it will target only customers that can afford to go electric.
General Motors (GM)
Much of the reason why I don’t favor the companies undergirding upstart EV stocks generating the necessary economies of scale to reach regular-income consumers centers on viability. Lucid’s enterprise value presently stands at $15.22 billion. On the other hand, the enterprise value for General Motors (NYSE:GM) tips the scale at $133.9 billion.
If anyone stands a chance of implementing economies of scale for EVs, it’s not a company like Lucid. Rather, it would be something like General Motors. That’s why I believe Lucid operates with the right mindset, targeting rich folks. On the flip side, GM can play the volume game and target first the upper-middle class, then the middle class proper.
Further, GM enjoys several popular combustion-based brands that will be electrified, such as the Hummer. That’s straight-up money in the bank as far as I’m concerned. With brands like the Corvette still raking up sales, GM offers a hybrid approach. It’s one of the most credible EV stocks to buy for the long haul.
On a similar note, I’m going to give a tip of the hat to Toyota (NYSE:TM) for credible EV stocks to buy. Sure, I understand the company’s outspoken hesitance about going all-in on electrification. Toyota’s CEO claims a silent majority of automakers have doubts about the EV-exclusive approach. Given how expensive the underlying platform is, the Japanese automotive giant might be onto something.
Setting that aside, while Tesla commands significant brand power as a leader among pure-play EV stocks, Toyota also commands substantial brand loyalty. That’s not surprising. Time after time, people gush about how reliable their Toyotas run. And many older models attract top dollar in the secondhand market because of said reliability. Frankly, such a reputation won’t fade anytime soon. Even though it’s not an exclusive member of EV stocks, Toyota draws attention from smart money. According to TipRanks, sentiment among hedge funds for TM stock rates as positive. Plus, with an enterprise value of nearly $360 billion, Toyota can easily deliver economies of scale when it wants to.
Honda Motor (HMC)
When discussing EV stocks, Honda Motor (NYSE:HMC) doesn’t really come up as a discussion point. That’s not surprising because the company currently focuses on its bread-and-butter combustion vehicles, such as the Civic. However, thanks to its brand power – it’s one of the most respected organizations in the world – Honda can corral its loyal customers to its future EV initiatives.
To be clear, the automaker aims to electrify two-thirds of global automobile unit sales by 2030. To that end, the company has several “exciting” (relatively speaking) models coming down the pipeline. Also, I would be remiss not to point out that Honda owns the Acura brand. Here, the company’s premium segment definitely features enticing projects (which I hope come to fruition).
While hedge fund sentiment rates as negative, that’s based on a quarter-to-quarter assessment. However, since the fourth quarter of 2020, these institutional players have been bidding up HMC. If you’re looking for EV stocks that will be around in 50 years, Honda represents a relatively safe bet.
For the final two EV stocks, we’re going to move to the over-the-counter market, beginning with Volkswagen (OTCMKTS:VWAGY). While the famous German automaker hasn’t been as prolific in electrification as say, Tesla, it’s making up for the lost time. Because the company owns so many individual automotive brands, the opportunities for electrification ring bountifully.
Further, the company’s ID.4 crossover/SUV should be very appealing once the economy normalizes. Featuring plenty of room and an estimated range of 275 miles, it’s plenty of charge for most urban driving needs. As well, it only needs about half an hour to reach zero to 80% charge. Finally, the MSRP of just under $39,000 will almost surely draw much attention.
Plus, another selling point for the ID.4 is that it’s not a Tesla. After seeing these things pop up everywhere, Tesla-fatigue may help bolster Volkswagen. If that wasn’t enough, VWAGY objectively rates as undervalued given its forward multiple of under 6.
The red-haired stepchild of the Japanese automotive market, Nissan (OTCMKTS:NSANY) incurred many controversies over the years. With steep competition from Toyota and Honda – which honestly command a far greater reputation – Nissan lacked transactions. For instance, in the trailing year, NSANY stumbled by 33%. Fortunately, though, recovery may be in the works.
For one thing, NSANY gained over 10% of equity value since the January opener. And in the trailing month, shares moved up more than 12%. Fundamentally, Nissan seeks to expand upon its EV portfolio beyond its electric-powered Leaf. With larger-sized electric SUVs on the way, Nissan could be a formidable player.
And while it’s not the greatest automaker in the world, it features a respectable enterprise value of over $56 billion. Therefore, it has a much better chance of fostering economies of scale than an EV upstart. Moreover, contrarians will appreciate that NSANY trades hands at 4.2 times forward earnings. That’s incredibly undervalued, making Nissan an intriguing idea among EV stocks.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.