EV stocks have multiplied in Tesla‘s (TSLA) wake and as electric cars look to go mainstream — but not all are created equal. Some car stocks are more ready than others for an EV future. Here are the top-rated electric-vehicle makers and EV plays.
- Li Auto
- Global X Lithium and Battery Tech ETF
Best EV Stocks To Buy Or Watch
The charts of most EV stocks are under fresh strain after severe damage in the past year. Broadly, both established automakers and startups are a speculative bet on electric vehicles, itself seen as a nascent field. They have suffered as a risk-off sentiment prevails in the current market, and as shortages of key components drag on.
The electric-car stocks below have the best mix of fundamentals and technicals.
Tesla Stock: Growing EV Sales
Tesla stock, the top auto and EV stock by market capitalization, has an IBD Composite Rating of 62 and an EPS Rating of 80. Shares are straddling their 50-day and 10-week lines, after a rally in June took them above those support levels for the first time in months. The relative strength line for TSLA stock is starting to tick up after falling to 2022 lows in June. It shows a big, long-term uptrend.
Tesla expects to grow vehicle deliveries 50% annually. In 2021, Tesla deliveries surged 87% to 936,172 vehicles.
In Q2 2022, Tesla deliveries rose 27% vs. a year ago but were down nearly 18% vs. Q1. The Shanghai plant was down for much of April due to Covid lockdowns. Tesla China sales hit a record in June after production returned to full capacity.
The Model S Plaid is Telsa’s fastest car yet, going from zero to 60 miles per hour in less than two seconds. Tesla makes four vehicles, mostly the Model 3 sedan and the Model Y crossover SUV. It also plans the Cybertruck, Semi and Roadster.
BYDDF Stock Tripling EV Sales
BYD (BYDDF) has no Composite Rating and an EPS Rating of 56. BYDDF stock rallied strongly in May and June but has now fallen below the 50-day/ 10-week averages. The relative strength line has pulled back from highs. China’s BYD is Hong Kong-listed, trading over the counter in the U.S.
Chinese car and battery giant BYD has shifted entirely to battery electric vehicles (BEVs) and plug-in hybrid electric vehicles (PHEVs). BYD more than tripled June and Q2 EV sales, amid Covid-19 lockdowns. That comes after it more than tripled EV sales in 2021. Backed by Warren Buffett’s Berkshire Hathaway (BRKB), BYD sells EVs in Norway and eyes other global markets.
A major battery maker, BYD may soon supply Tesla with EV batteries. BYD also makes its own chips, which allowed rapid expansion in 2021 and so far this year.
LI Stock Pauses After Huge Spike
The Chinese EV stock is consolidating near highs after a seven-week spike from early May to late June, which saw shares more than double in value. LI stock remains above key averages and its RS line has bolted to highs.
Li Auto sells the Li One SUV. The Li One is a hybrid EV, with a small gasoline engine to extend its range. The L9 SUV, Li Auto’s second model, launched June 21.
Li Auto’s EV sales rebounded in June and May, jumping 63% in all of Q2 despite Covid headwinds. In 2021, Li nearly tripled EV sales. Revenue is growing at a triple-digit pace.
SQM Stock: Lithium For EV Batteries
SQM stock carries a perfect 99 Composite score and an 83 EPS Rating. SQM stock successfully broke out in May on strong earnings backed by surging lithium prices. Sociedad Quimica y Minera triggered a sell signal in June after giving up double-digit gains from the breakout. But its relative strength line remains not far from highs.
A decisive break above the 50-day line could offer an aggressive entry into SQM stock.
Chile’s SQM is riding the global adoption of electric vehicles, which use lithium batteries. In Q1, lithium prices skyrocketed as demand for the critical EV battery material outpaced supplies. SQM also produces iodine and potassium, used in X-rays and fertilizers respectively.
Lithium ETF Holds SQM, Tesla, BYD
The Global X Lithium and Battery Technology ETF rallied sharply for most of 2020 and 2021. The LIT ETF jumped 44% in May after slumping in the first four months of 2022. But it has pulled back a bit since and is back below the 50-day/10-week lines.
It has a Relative Strength Rating of 65 out of a possible 99. That means it has outperformed 65% of all stocks in IBD’s database during the past year.
The largest holdings in the lithium stock ETF include Albemarle (ALB), as well as SQM, BYD and Tesla. The LIT fund also invests in miners and refiners of lithium, as well as battery producers. Most of today’s EVs use lithium-ion and lithium iron phosphate (LFP) batteries.
Investing in an ETF, or exchange traded fund, can reduce single-stock risk.
In the near term, EV stocks will continue to face chip constraints but those are starting to lessen. Battery costs and shortages could be an issue in the midterm, as supplies of lithium and other raw materials struggle to keep up with demand. Longer term, more government support is likely headed for electric vehicles, while greater EV production should help bring down vehicle prices.
Are Electric-Vehicle Stocks A Good Buy?
Companies with two important characteristics generally make the best candidates for stocks to buy and watch, according to CAN SLIM guidelines. First, they need a strong track record of earnings growth. Second, the stock should be showing elements of market outperformance, and be shaping bullish chart patterns.
But most of the new EV stocks have neither. They include Fisker (FSR), Canoo (GOEV), Faraday Future (FFIE), Lordstown (RIDE) and Xos (XOS). In fact, many of these EV startups aren’t producing or delivering electric vehicles yet.
Meanwhile, Chinese EV stocks like Nio (NIO), Xpeng (XPEV) and Li Auto (LI) sell tens of thousands of vehicles, but remain unprofitable for now. Then there are legacy auto giants like General Motors (GM), Ford (F) and China’s BYD Co. (BYDDF) that are transforming into electric-vehicle powerhouses.
Electric-Car Stocks, Battery Stocks, Charging Stocks
The growing universe of EV stocks doesn’t end with carmakers. A constellation of other companies provide car batteries, car charging stations, electric motors and other EV-associated products. Among them are EV charging networks ChargePoint (CHPT), EVgo (EVGO), Blink Charging (BLNK) and Wallbox (WBX).
Hyliion (HYLN) is developing electric powertrains for big-rig trucks as well as powertrains that can be compatible with renewable natural gas and hydrogen fuel cells.
Romeo Power (RMO) makes battery packs for commercial EV fleets. QuantumScape (QS) touts a major breakthrough in solid-state lithium metal batteries. And Global X Lithium and Battery Technology ETF (LIT) holds a basket of stocks, from lithium miners to battery producers, poised to benefit from the rise of electric vehicles.
Magna (MGA) supplies battery enclosures and e-drive gearboxes to the likes of GM, Nio and Xpeng. The company also will make the Fisker Ocean SUV, likely to arrive by year end.
Find Aparna Narayanan on Twitter at @IBD_Aparna.
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