Once a group that could seemingly only go up, electric vehicle (EV) stocks have had a rough ride in 2021. First it was fears of rising rates and the corresponding impact on companies with high valuations. More recently, it has been doubts about the viability of the Biden administration's infrastructure plan weighing on EV stock performance.
While the path of interest rates and government spending on clean energy initiatives remains unclear, one thing is for certain. Electric vehicles of all shapes and sizes are coming. Governments worldwide are rolling out new carbon emission targets and incentives designed to make people and businesses want to go green. According to consulting group AlixPartners, EVs will account for roughly one in four global vehicle sales by the end of the decade.
So, should investors play the EV space by investing in vehicle manufacturers, battery makers, lithium producers, or charging stations? Well, all of the above. Consider charging your long-term growth portfolio with these three oversold EV plays.
Will Canoo Stock Make a Comeback?
There are several upstart EV manufacturers not named Tesla and Canoo (NYSE: GOEV) is among the most interesting. The former SPAC has developed a versatile platform that serves as the base for a range of personal and commercial EVs. Some designs look more like Brinks armored trucks, but its plausible the Canoo look catches on with rugged, outdoorsy consumers and fleet operators.
While the boxy vehicle design is unappealing to some, Canoo’s proprietary ‘plug-and-play’ technology is appealing from an investment standpoint because it makes the company’s cost structure more manageable. The ability to use the same platform across its vehicle fleet creates operating efficiencies and improves profit potential.
Like its vehicles, Canoo’s financial statements aren’t pretty. The company is still pre-revenue and therefore piling up the losses at this stage. So, risk-bearing investors will have to take a leap of faith that management’s ‘path to manufacturing’ will play out as expected—and that pre-orders will be good. Canoo is targeting Q4 of next year to start contract manufacturing in Europe before launching production at its own U.S. plant in 2023.
In the last few days Canoo stock has started to paddle back upstream in good volume. A head and shoulders bottom pattern has formed on the daily chart putting the $10 to $11 range in the crosshairs. And with the influence of social media investors, a potential squeeze on the highly shorted stock could be forthcoming.
Is Lithium Americas a Good Long-Term EV Play?
Vancouver-based Lithium Americas (NYSE: LAC) hasn’t experienced the selloffs that other EV stocks have, but the recent dip is looking like a good entry point. The company is well-positioned to be a long-term winner as a supplier of battery-quality lithium carbonate to battery makers and EV manufacturers. Lithium Americas is developing a pair of promising lithium mining projects.
Its Thacker Pass project is located north of Reno, NV while its Cauchari-Olaroz project is in Argentina. Construction at the fully owned Thacker Pass, the largest lithium resource in the U.S., is slated to begin early next year. With a mine life of 46 years, annual lithium production is forecast to be 60,000 tons once up to full speed. At Cauchari-Olaroz production is set to get underway around the middle of next year. That project has a 40-year life and annual production capacity of 40,000 tons.
Projected cash costs to operate the mines are around $3,000. Compare that to lithium carbonate prices which have recently soared above $16,000 and the expected profit margins are enormous. Demand for lithium as a key input for EV batteries is expected to increase throughout the decade. With global lithium supply limited, many customers will be turning to Lithium Americas—and so should investors.
Is ChargePoint a Good EV Infrastructure Stock?
After nearly touching $50, ChargePoint Holdings (NYSE: CHPT) is now a $20 stock—and an inexpensive play on EV infrastructure. The company runs one of the largest EV charging networks in North America and is quickly expanding its footprint in Europe. As EV adoption unfolds around the world, consumers and commercial fleet operators will need the hardware, software, and services to keep their vehicles moving. ChargePoint is in a good position to be one of the leading providers.
Well before you could buy an electric vehicle, ChargePoint was building its business. Today there are more than 100,000 stations on the ChargePoint network that serve early EV adopters including three-fourths of Fortune 50 companies. And with approximately $60 billion projected to be spent on EV charging infrastructure across North America and Europe by 2030, the network is about to get much bigger.
Since ChargePoint is operating at a net loss it may not be attractive to some investors. However, with revenue growth humming along around 60% and a capital light business model, profitability isn’t that far down the road.
If you build it, they will come. As ChargePoint continues to build out its charging network, EV drivers will be coming. And ChargePoint shareholders will be going along for the ride.
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