Investors have no shortage of beaten-down electric vehicle (EV) manufacturers to choose from in 2022. Virtually all of them have lost 10% or more of their value in the first three weeks of the new year.
But a low stock price doesn't necessarily mean a good value; the market is littered with penny stocks that are cheap for a reason: Their prospects for future success are very dim. While EVs may be achieving critical mass, that doesn't mean all EV makers will survive. Or should.
It's also worth noting that even with the big drops in stock prices that they've suffered, the industry as a whole still carries nosebleed valuations. A good argument can be made that EV makers haven't fallen enough.
That means investors need to tread carefully when choosing EV stocks for their portfolio. The following pair of manufacturers are the best undervalued investments today.
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To some, saying Tesla (NASDAQ:TSLA) is undervalued is ludicrous. Even with its stock down almost 11% year to date, it still trades at around $940 a share. While the decline has brought its market cap below $1 trillion, it's still the most valuable carmaker and it remains worth more than the next 30 manufacturers combined, including the likes of Ford Motor Company, General Motors, and Toyota Motor.
Yet there's a good reason investors should give Tesla a closer look. It delivered over 936,000 vehicles last year, meaning in a little over 10 years since going public it is selling almost half as many cars as does the biggest U.S. car manufacturer, Toyota, which sold 2.3 million vehicles in 2021.
Tesla's latest Gigafactory just came online and it is expected to produce 30,000 new vehicles by the middle of the year, while CEO Elon Musk has said he wants to sell 20 million EVs by 2030. That seems like a flight of fancy today, but even if he falls short by half he'll be producing almost as many EVs as the entire auto industry does today.
Tesla also has something else going for it: It is profitable, and has been for 10 consecutive quarters. That's a claim few other EV makers can make and Tesla's stock price today could seem very quaint by the beginning of the next decade.
For a number of the same reasons I like Tesla to be an EV winner, I like Nio (NYSE:NIO), too. Although I remain leery of investing in Chinese stocks as a whole because of the country's government and its mercurial leaders, Nio should be able to avoid the crackdowns and regulatory interference other tech oriented companies have endured.
It is helping Beijing to achieve its goal of competing with developed-world economies on major fronts, especially the development of what it calls new energy vehicles, or plug-in electrics. Businesses that make the government look good should fare well.
Nio is also delivering the goods, some 10,900 EVs in November and another 10,500 in December. Were it not for the global supply chain disruptions, it likely would have done even better.
It also just upgraded its existing manufacturing plant and plans on bringing a second plant online by the third quarter of this year. Together, it will bring Nio's annual capacity to 600,000 vehicles, which it believes is sufficient for demand right now.
Nio plans to be in five more European countries this year, which should further accelerate its growth. Plus it launched its battery-as-a-service program in 2020 that lets buyers charge, upgrade, or swap out old batteries for new ones through a subscription fee, giving it a stream of recurring revenue.
The EV maker's stock has lost 13% of its value so far in 2022 and is down nearly 60% from the highs it hit last summer when it traded for around $65 a share. With Nio becoming the biggest, fastest growing electric car maker in the world's largest EV market, and the possibility of turning profitable by the end of the year, at under $30 a share, Nio is an undervalued winner.
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