The peak for investing in EV stocks is far into the future, thus making these companies potentially lucrative investment options for discerning investors. Not only do these companies trade at attractive valuations, but robust free cash flow projections support their long-term outlooks, and many of them are gearing up for short-term profitability as well.
EV stocks are here to stay despite their short-term weaknesses in deliveries. It’s due to these short-term problems that I feel enhance their bull case even stronger. If investors only buy stocks when things are going well, they are, in effect, buying high and hoping to sell higher later. But scooping up shares of these companies when they are struggling sticks to the adage of buy low, sell high.
So, here are three EV stocks for investors to consider if one is seeking solid capital appreciation for this year. The names are fueling the wider EV revolution into the foreseeable future.
Tesla (TSLA)
Tesla (NASDAQ:TSLA) concluded 2023 on a high note, achieving record deliveries and surpassing its production goal of 1.8 million units. The company’s outlook for 2024 includes the introduction of a rumored $25,000 vehicle, updates to the Model 3 and Model Y and increased production of the Cybertruck.
Looking ahead, analysts predict a year of growth for Tesla in 2024 despite potential challenges. Dan Ives of Wedbush expects Tesla to introduce a sub-$30,000 vehicle while Gene Munster of Deepwater Asset Management suggests Tesla will maintain its dominant U.S. EV market share despite the competition from cheaper and mid-market Chinese EV companies.
I agree with the other analysts here on TSLA stock. I think American-made Teslas will continue to maintain its dominance, at least partially because it is made on the soil of the U.S. The brand perception and quality of Teslas are unmistakable for many, and a cheaper competitor can’t easily undercut that positioning.
General Motors (GM)
General Motors (NYSE:GM) is making substantial investments to pivot towards electric and autonomous vehicles and I think it’s one of the more underrated picks in the industry that investors should have on their radars.
The company is targeting the manufacture of between 200,000 and 300,000 Ultium-based EVs in 2024 and further electrification efforts with a plan to launch 30 new EVs by 2025.
Meanwhile, in 2023, GM reported a 14.1% jump in sales to 2.6 million vehicles, marking its best year since 2019. The company also grew its market share in the United States. That positive momentum is supported by its forecast of total U.S. auto industry sales hitting 16 million in 2024.
With a P/E ratio of just five times sales, GM is one of those EV stocks that could be considered undervalued, especially if one finds the valuation of TSLA and the like too rich for their tastes.
Ford (F)
Ford (NYSE:F) Blue, the division responsible for gas and hybrid vehicles, reported an 8% revenue increase last year, outpacing wholesale growth, with hybrids making up 13% of Ford Blue’s U.S. volume. It expects double-digit growth in this segment for 2024
For this year, Ford is optimistic, projecting an adjusted EBIT of $10 billion to $12 billion and aiming to generate $6 billion to $7 billion in adjusted free cash flow. That outlook is supported by overall lower vehicle pricing.
However, in the EV space, it should be noted that Ford is a contrarian pick. Still, I believe it can turn its fortunes around. Its EV division reported a full-year EBIT loss of $4.7 billion for 2023. For 2024, wider losses are projected for the Model E unit, with an expected EBIT loss of $5 billion to $5.5 billion.
F stock, therefore, trades at a deep discount, at six times forward earnings and just .28 times forward sales. Its stock price of $12.44 and dividend yield of 3.57% could make it a valuable wheel or covered call target for option writers, in addition to being one of those solid EV stocks to consider.
On the date of publication, Matthew Farley did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.