Words like “epic” and “unprecedented” get thrown around a lot these days. It's not every day that we get to live through a pandemic, a global shutdown and the biggest injection of central bank stimulus in history.
But the action in electric vehicle (EV) stocks has certainly been epic. Tesla, for instance, is up about 315% from its 2020 lows … and TSLA stock isn't even considered speculative by the standards of this sector.
But perhaps “unprecedented” would be a stretch. Tech stocks in general have been looking euphoric this year, bringing back memories of the 1990s tech bubble.
Today's tech companies as a whole are far more profitable than their predecessors in Tech Bubble 1.0. The large tech companies dominating the S&P 500 today – such as Apple (AAPL), Microsoft (MSFT) and Alphabet (GOOGL) – practically gush cash. But electric vehicle stocks are a clear exception to that rule. Most are not profitable. Investors today are buying EV stocks in expectation of future profitability as the world's auto fleet transitions away from fossil fuels.
Excitement in the sector isn't necessarily unfounded. Electric vehicles really are a growth market.
“When it comes to renewable energy, this is not something that happens years in the future. It's happening today,” says Allister Wilmott, president of ARC Aviation Renewables, a solar-power and LED aviation lighting firm. “Already, about one in 40 new cars is electric. But that number grows every year, and 20% or more of all new car sales will likely be electric by 2030.”
At the same time, traditional automakers aren't going to sit back and watch their market share collapse. Virtually every major automaker is aggressively expanding into electric vehicles, hybrids and other green alternatives, even as falling gasoline prices have made the purchase decision less economical for drivers.
Today we're going to take a look at some of the largest and most popular EV stocks. This isn't necessarily a recommendation list – some of these electric vehicle stocks might indeed not be right for you. Every stock on this list is highly speculative, so you should only purchase them if you have a high tolerance for risk. But each of these companies certainly has investors' attention these days.
Market value: $278.4 billion
For many investors, Tesla (TSLA, $1,500.84) is the electric vehicle market.
There were electric vehicles before Tesla, of course. But no one wanted to drive them. The styling was typically awful, and the cars lacked power.
Tesla changed all that. Led by its charismatic CEO Elon Musk, Tesla made electric vehicles cool.
TSLA stock has been “expensive” by most traditional valuation metrics for substantially its entire history. Today, it trades for 10.7 times annual sales. To put that in perspective, Apple – one of the highest-margin hardware makers in history – trades for just 6.5 times sales, and most automakers trade for less than 0.5 times sales.
Slicing the numbers differently, Tesla might sell something in the ballpark of 500,000 cars this year. At Tesla's current market cap, investors are paying over $556,000 for each car sold.
Investors clearly aren't valuing Tesla like a car company. They're valuing it like a highflying tech startup. And perhaps that's reasonable given the company's leadership in battery technology and autonomous driving. But Tesla is expensive even by tech stock standards.
“It is tough to fight the momentum,” Citigroup analyst Itay Michaeli wrote in a recent note, “but it's even tougher to construct a fundamental risk/reward framework that makes sense here (particularly with COVID-19 risks), even if one is constructive on Tesla the company.”
All the same, that same argument could have been made at virtually any point over the past 12 years and it would have been equally true. Yet TSLA shares have continued to soar even higher.
And with Tesla stock's rumored inclusion in the S&P 500 a possibility, TSLA might be enjoying institutional respectability in a hurry.
Market value: $13.1 billion
Nio (NIO, $11.09) is a Chinese electric vehicle maker, which makes it interesting for several reasons. To start, China has far less of a domestic energy industry to support and still imports most of its fossil fuels. This gives the country far more of an incentive to lower energy imports by pushing electric vehicle ownership. Furthermore, China's air quality is abysmal in most cities, and moving its car fleet from fossil fuels to electric vehicles would certainly help that problem.
Late last year, before the COVID-19 outbreak wreaked havoc on the Chinese economy, the Chinese government was reportedly considering a requirement that 60% of all car sales in China be electric vehicles by 2035.
As one of China's electric vehicle champions, NIO stock is a way to play the trend of a greener China. Investors have taken note, sending the shares up by 230% over the past year.
Again, though, you'll need to be careful here. Chinese stocks do not have the best reputations for clean accounting, and Nio carries a lot of debt to boot. Its debt-to-equity ratio is a ridiculously high 9.3. Valuation is unsurprisingly problematic, too. “The current share price reflects over-optimism given no substantial changes to volume/profit expectations,” writes Goldman Sachs analyst Fei Fang, who recently downgraded Nio's shares to Sell.
NIO stock might decouple from gravity once more. Only time will tell. But you probably don't want to have a lot of capital tied up in a stock this speculative.
Market value: $215.4 million
If you thought an over-indebted, money-losing Chinese carmaker was a speculative play, take a look at Electrameccanica Vehicles (SOLO, $3.36). Electrameccanica is a small Canadian firm with just 63 full-time employees and a market cap of just $215 million.
You're not really buying a company here. You're buying a concept.
Electrameccanica sells its cars under the Solo brand, and let's just say they're a bit different. The car has only one seat and three wheels, making it look more like a go-cart than a passenger vehicle. But if you're looking for minimal environment impact, Solo is your car.
SOLO went public about two years ago, and it has been a rocky ride. The shares have spent most of the past two years drifting lower before reversing sharply higher starting in May. The shares are trading roughly 270% above their 52-week lows.
As with most of the EV stocks on this list, Electrameccanica isn't yet profitable. It's an interesting company … but it's extremely risky.
Market value: $174.2 million
Arcimoto (FUV, $5.75) gets lumped in with the other electric vehicle makers, but it's not the fairest comparison.
Arcimoto manufactures and sells three-wheeled electric vehicles, including the Fun Utility Vehicle (FUV) it bases its stock ticker symbol on. These bright vehicles might be compact and a little unorthodox, but they're highway-legal and capable of handling everyday purposes such as commuting or running errands.
The company also sells the Rapid Responder model for emergency, security and law enforcement services and its Deliverator for goods delivery.
Perhaps the best part of Arcimoto's story is that it's not directly competing with Elon Musk and Tesla, which deal in more traditional car categories.
Like the rest of the EV stocks on this list, FUV shares are looking awfully bubbly. The stock is up 480% from its March lows.
Market value: $1.4 billion
Our last pure-play electric vehicle company is Workhorse Group (WKHS, $14.93), which not only makes EVs, but electric delivery drones too.
Workhorse is a little different from the rest of the companies on this list. For one, it has a little bit of history, with roots going back to 1998. Also, it doesn't focus on consumer vehicles – it makes delivery vans. WKHS originally started by converting vans made by other manufacturers but transitioned to making its own original models in 2015 following a merger.
The potential here is obvious. The delivery business is booming during the pandemic, and that's not likely to change once life gets back to normal. Already, Workhorse counts United Parcel Service (UPS) and Ryder System (R) among its customers.
But the numbers get ridiculous here in a hurry. Workhorse expects to sell 400 vans this year. Not 400,000 … just 400. Yet the company is worth well more than a billion dollars.
Expensive stocks can always get more expensive, of course. Roth Capital analyst Craig Irwin recently raised his firm's price target on WKHS stock from $12 per share to $27 based on “impressive” growth potential spurred by its C-Series all-electric trucks and its 10% stake in Lordstown Motors, among other things. But as with all electric vehicle stocks, you should really be careful with this one.
Bonus: The Radical New Battery Company Disrupting Big Oil
Check out this incredible demo.
It’s pretty crazy stuff.
It’s of a mind-blowing new type of battery insiders are calling a “paradigm shift” in energy technology…
Even going so far as to call it the “Quantum Battery” because the properties it exhibits are so miraculous.
In fact, it’s proven to be such a game-changing force that some of the most powerful oil and gas corporations in the world are terrified of this breakthrough and what it’s going to do to disrupt their industry.
To them, the writing is on the wall.
It’s either embrace this new technology or become obsolete.
The U.S. Department of Energy has already classified this innovation as a “critical need” for the mass adoption of electric vehicles — as it finally promises to dramatically reduce our reliance on foreign oil.
At the heart of this revolution, one tiny company — less than 1/1000th the size of General Motors — is gearing up to drive the commercialization of this technology…
Folks who get in on this breakthrough now, BEFORE it’s rolled out on a mass scale, will have the chance to be a part of the single largest legal creation of wealth of the last 25 years…