2 Electric Vehicle Stocks Rated Strong Buy

The automobile industry is quickly modernizing as more companies enter the electric vehicle (EV) space and redefine the driving experience.  Governments from around the world are offering subsidies that encourage drivers to look for more eco-friendly modes of transportation.  As a result, new EV startups are challenging legacy auto makers and the industry is experiencing spectacular growth. 

A report by Allied Research found that the industry had sales of $164 billion in 2019 and is expected to grow to $802 billion in 2027. A separate report by Fortune Business Insights is more optimistic as it expects the industry to grow to more than $1 trillion by 2028.

In today’s article, I’m going to take a look at two EV stocks, Nio (NIO) and GreenPower Motor Company (GP), which both have average analysis consensus ratings of ‘Strong Buy.’  Both stocks

NIO 

NIO is a fast-growing Chinese electric car company with a market capitalization of more than $66 billion. The company sells most of its cars in China, the second-biggest EV market in the world. The company recently acquired a license to start selling cars in Europe, another leading car market. 

The average price target for the NIO stock is $60.25, which is about 50% above the current price.  Analysts are optimistic about NIO for several reasons. First, the company has established a solid position in China, a country that is quickly becoming one of the most important places for EV cars. The country has already announced plans to phase out fossil fuel cars by 2035.

Second, NIO’s growth has been relatively strong as the company has been ramping up production and sales this year despite the ongoing chip shortage. In September, the company sold a record-high 10,628 cars. The overall year-over-year growth rate in September was about 128%. 

The sales composition was 1,978 ES8, 5,260 ES6s, and 3,390 EC6. In total, the company sold more than 24,000 cars in the third quarter, and since NIO is a relatively new company, analysts are optimistic that this trend will continue. 

Another reason, while NIO is still an unprofitable company, analysts expect that revenue growth will accelerate. The firm’s annual revenue has risen from $719 million in 2018 to more than $2.49 billion in 2020. The average revenue estimate is that NIO made more than $1.46 billion in the third quarter. Looking ahead, they expect that its annual revenue will rise to $5.6 billion this year and to $9.4 billion in the following year.

Another catalyst for NIO is the European license. There is a possibility that the firm will replicate the success that Tesla has had in the continent there. This is notable since the continent has become the biggest EV market in the world, helped by large government subsidies.

NIO is an expensive company that has a forward EV to sales ratio of 10.27. However, its strong growth will help to offset this overvaluation. Still, NIO faces some key challenges ahead, including the rising competition from Chinese firms like Li Auto (LI) and XPeng (XPEV). At the same time, traditional companies like Toyota, BMW, and Daimler are investing billions in EVs as well.

GreenPower Motor Company

GreenPower is an EV company that is relatively different from NIO in that it targets municipal and corporate customers. It sells school buses, delivery trucks, normal buses, and other trucks. 

The Canadian company has a market cap of more than $236 million, making it a relatively small player in the industry. 

The average price target for GreenPower is $31, which is about 135% above the current price.  Analysts are excited about GreenPower for several reasons. One reason is the company is tackling a sub-section of the EV world that is relatively untouched by big players like Tesla and General Motors (GM). Most of these larger companies are focused heavily on the consumer market. 

Since the company has operations in the US, it will likely benefit from the infrastructure package that has sections on transit. It also has options for electrifying a substantial portion of 20% of school buses. A study by PS Research noted that the US electric bus market will rise from $445 billion in 2018 to more than $1.5 trillion in 2024. Therefore, analysts believe that the firm can take a substantial share in these niche industries.

Additionally, GP has delivered relatively strong results this year. In the most recent quarter, the company had revenue of $2.7 million, up by 17% from the same quarter in 2020. It is also cash flow positive and has a strong balance sheet with more than $41 million in cash. It raised $200 million in July by selling shares.

One more reason, the company has continued to receive and process orders. For example, in October, the firm delivered 24 EV Stars to Zeem Solutions. This delivery was in addition to the 30 vehicles it delivered to the company since the year started. It also delivered 10 EV Cab and chassis to WeShip.