Many electric vehicle (EV) stocks have slumped over the past year as the market cooled and rising interest rates compressed their valuations. But according to Precedence Research, the global electric vehicle market could still grow at a compound annual growth rate (CAGR) of 23.4% between 2024 and 2032, as electric vehicles gradually replace gasoline vehicles.
Therefore, the recent sell-off in electric vehicle stocks could represent a golden buying opportunity for value-minded investors who can ride out near-term headwinds. Today I’m going to take a deeper dive into three struggling electric vehicle stocks: Rivian Automobile (NASDAQ:RIVN), Nio (NYSE:NIO)And ChargePoint Fund (NYSE:CHPT) – and explain why they could generate multiple gains with a modest investment of $1,000 over the next few years.
1. Rivian Automobile
Rivian produces custom electric vans, SUVs and an electric delivery van (EDV) for its main investor, Amazon. It produced 24,337 vehicles in 2022, although it struggled with supply chain constraints. It then more than doubled its production to 57,232 vehicles in 2023, and revenue increased 167% to $4.43 billion last year.
Despite this accelerated growth, Rivian shares are trading nearly 90% below their IPO price, and many investors remain bearish on Rivian for two reasons. First, the company plans to produce just 57,000 vehicles this year as it faces more severe macroeconomic headwinds and temporarily closes its main plant in Illinois for a few weeks to streamline production and incorporate new technologies. Second, it posted a staggering net loss of $5.43 billion in 2023.
However, Rivian shares currently look cheap, at less than twice this year’s sales. It still had $10.5 billion in total liquidity at the end of 2023, and its low debt-to-equity ratio of 0.8 still gives it some room to raise new cash. It’s also obligated to deliver 100,000 EDVs to Amazon by 2030. So if you think Rivian can ramp up production and fulfill all those orders over the next few years, now could be a great time to buy its shares on the dip.
2.Nio
Nio is a Chinese electric vehicle manufacturer that sells a wide range of sedans and SUVs. It differentiates itself from the competition with its exchangeable batteries, which can be quickly replaced with fully charged batteries via its network of exchange stations.
Nio shipped 122,486 vehicles in 2022 and its deliveries increased by 31% to 160,038 vehicles in 2023. But in 2023, its revenue increased by only 13% to 55.6 billion yuan ( 7.8 billion dollars), the price war for electric vehicles in China forcing it to reduce its prices. .
As a result, Nio’s automotive margin fell from 13.7% in 2022 to 9.5% in 2023, and its net loss widened from 14.4 billion yuan to 20.7 billion yuan ( 2.92 billion dollars). It also continued to increase spending on expanding its battery trading network. This slowdown in revenue growth and the red ink caused Nio’s stock to fall more than 30% below its IPO price.
But for 2024, analysts expect Nio’s revenue to increase 18% to 65.8 billion yuan ($9.1 billion), while the net loss narrows to 16.2 billion. yuan ($2.2 billion). Its high debt ratio of 3.4 could limit its ability to raise more capital, but it had 57.3 billion yuan ($8.1 billion) in cash and equivalents at the end of 2023.
Nio is still a speculative play, but it’s trading at less than one times this year’s sales – so any positive news regarding China or the electric vehicle market could send its stock higher.
3. Charging point
ChargePoint is the largest manufacturer of electric vehicle charging stations in North America and Europe. Its revenue jumped 65% in fiscal 2022 (which ended in January 2022) and another 94% in fiscal 2023. But in fiscal 2024, its revenue didn’t increased by only 8% to $507 million while its net loss widened from $345 million to $458 million.
This deceleration was caused by a slowdown in the electric vehicle market, competition from other electric vehicle infrastructure companies, and macroeconomic headwinds that forced many companies to limit spending on new electric vehicle charging stations. As a result, ChargePoint is now trading at around $1, nearly 97% below its opening price of $30.11 after going public via merger with a special purpose acquisition company (PSPC) three years ago.
That may seem like a bleak situation for a company that ended fiscal 2024 with just $358 million in cash and a high debt-to-equity ratio of 2.4. But it still hasn’t drawn cash from its $150 million revolving credit facility and faces no debt maturities until 2028. So ChargePoint could still turn things around if the electric vehicle market heats up again.
For fiscal 2025, analysts expect its revenue to rise 9% to $553 million, while its net loss narrows to $264 million. Based on these estimates, ChargePoint looks like a considerable value play, accounting for less than 1x this year’s sales.
Should you invest $1,000 in Rivian Automotive right now?
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Leo Sun has positions at Amazon. The Motley Fool holds positions and recommends Amazon and Nio. The Mad Motley has a disclosure policy.
3 Obvious EV Stocks to Buy with $1,000 Right Now was originally published by The Motley Fool
