Electric vehicles, electric vehicles, are making headlines, and for good reason. There is concerted pressure from both governments and societal entities to promote electric vehicles over combustion engine cars, and this has resulted in a global market for electric vehicles currently valued at $250 billion. . Almost every major automaker produces electric vehicle models, and smaller independent companies have been popping up in major markets for several years now. By 2028, the electric vehicle market is expected to reach unit sales of 17.07 million vehicles, generating a market volume of over $900 billion.
For the retail investor, this means electric vehicle stocks are an area of opportunity. Projected growth of this magnitude doesn’t happen often, but when it does, it means entire industries are changing. Current electric vehicle production won’t come close to meeting projected 2028 demand, and companies that can expand to meet that demand will thrive. The trick is to find them.
Wall Street’s professional stock analysts are ready for the challenge. They scoured the auto industry, looking for electric vehicle stocks that are expected to rise with increased demand – and from investment firm Stifel, analyst Stephen Gengaro picked out two stocks investors should review. They are both stocks listed for buy, and Gengaro sees 90% or better for each of them.
According to the TipRanks database, Gengaro isn’t the only one who thinks these stocks have a lot to offer investors; both are ranked as Strong Buys by analyst consensus. Let’s take a closer look.
ChargePoint holdings (CHPT)
We’ll begin our review of electric vehicle inventory with ChargePoint, a leader in the charging station niche. Although ChargePoint does not build actual cars, it produces, markets and installs the vital charging infrastructure that will transform electric vehicles from a novelty into a convenient transportation option. The company offers a variety of charging station options for businesses, for fleets and for individual drivers.
The company has been in operation since 2007, and its network of charging stations has grown to the point that ChargePoint can boast of having someone plugging in every second or so. That’s more than 172 million charges delivered over the years, and ChargePoint claims 76% of Fortune 500 companies among its customers. It’s an impressive record.
ChargePoint produced decent financial results in the first quarter of the recently released fiscal year 2024. The company posted total revenue of $130 million, up 59% from a year earlier — and beating analysts’ expectations of $1.67 million. Ultimately, like many leading tech-focused companies, ChargePoint operates at a loss. The company’s GAAP EPS of a loss of 23 cents was in line with guidance, while the non-GAAP figure of a loss of 15 cents per share was 2 cents better than guidance.
Looking ahead, ChargePoint projects Q2 tax revenue of $148 million to $158 million; this would represent a gain of 41% year-on-year at the midpoint. ChargePoint has ample resources to continue its expansion, with $313.7 million in cash on the balance sheet at the end of the fiscal first quarter (April 30).
For Stifel’s Stephen Gengaro, it all adds up to a stock that investors should seriously consider, describing it as his “preferred charging name for electric vehicles”. He is impressed with ChargePoint’s strong position in the charging market and its ability to expand that position.
“We reiterate our belief that CHPT is well positioned to capitalize on the expected robust growth in electric vehicle sales and demand for chargers over the coming years. We expect the business to deliver solid revenue growth in 2023-25+, and appear on track to generate positive FCF by the end of calendar year 2024,” Gengaro said.
Gengaro continues to price CHPT stock as a buy, and its price target of $17 implies a one-year gain of around 94% for the stock. (To see Gengaro’s track record, click here)
The Street, in general, gives CHPT shares a consensus Moderate Buy rating, based on 14 recent analyst reviews that include 10 buys and 4 holds. The stock’s $15.40 mid-price target suggests an upside of around 75% over the next 12 months from the current price of $8.79. (See CHPT inventory forecast)
Canoo, Inc. (GOEV)
Next up is Canoo, a California-based manufacturer of a versatile EV platform, a vehicle chassis adaptable to a variety of EV types and models. Canoo is working on several types of electric vehicle designs, based on this common platform. Final designs include a ‘lifestyle’ vehicle, a light-to-medium pickup truck and a delivery vehicle targeting the ‘last mile’ niche. The latter is an operational mode that electric vehicles have proven themselves in, as their combination of short to moderate range and zero emissions is well suited for stop-and-go city delivery driving.
Canoo’s EV chassis features several innovative elements. The company’s vehicle design includes independent electric motors on all four wheels, reducing weight and transmission complexity. In addition, it incorporates an electrically assisted steering capable of “drive-by-wire”. The dashboard is uncluttered, offering the driver and front passenger a wide field of vision. Additionally, the steering column can be moved between the driver and front passenger seats. The vehicle comes with wireless connectivity and users can download a mobile app which allows them to monitor the vehicle from any location.
With all of that, it’s important to note that Canoo has yet to put its vehicle into regular production. The company recently struck deals with Walmart and Zeeba to purchase 4,500 and 3,000 vehicles, and these add to an already large backlog. But – the company is burning cash and struggling to raise capital. In 1Q23, Canoo posted no revenue and a GAAP net loss of 22 cents per share, 4 cents per share worse than expected.
Stifel’s Gengaro acknowledges that it is a highly speculative stock, not for the risk averse, but believes that if Canoo can survive its financial difficulties, the rewards are worth it.
“We view Canoo as a high-risk, high-reward stock due to its ongoing funding needs and the risks associated with ramping up production volumes to profitable levels. We are confident that demand for Canoo’s vehicles is strong, supported by a committed backlog of 18,000 units, an additional $2.8 billion in orders (~60,000 units) and our confidence in the consumer and commercialization of its electric vehicles,” explained Gengaro.
“We believe there are three key drivers for the stock over the next 12-24 months, including 1) meeting production targets; 2) financing transactions; and 3) generating positive gross margins. To our view, these three elements are closely intertwined and start with funding,” the analyst added.
To that end, Gengaro is pricing GOEV shares long, and its price target of $1.50 indicates there is room for a 207% gain over the coming year.
Gengaro isn’t the only one willing to take a risk on GOEV; the stock has 3 recent analyst ratings, all positive, for a strong unanimous buy consensus. The shares are trading for just $0.49, and the average price target of $4.50 implies a whopping potential appreciation of around 819% over the one-year horizon. (See Canoo Stock Forecast)
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Disclaimer: The views expressed in this article are solely those of the analysts featured. The Content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.