The electric vehicle revolution is real.
A few years ago, did you believe it was possible for Tesla Inc. TSLA, -2.72% to make and sell half a million cars a year? Well, the company made 145,036 electric vehicles during the third quarter and delivered 139,593.
But you may not want to jump on a stock that has risen so much this year. There are many other ways to play the EV trend and related development of autonomous driving technology. A screen of companies in a broad array of industries connected to EVs is below.
There’s no question that EVs will continue to storm the auto market. General Motors Co. GM, -0.22% plans to have 30 fully electric models available by 2025, with 40% of its vehicles available in the U.S. being EVs by the end of that year.
President-elect Joe Biden has said that he favors the continued tightening of fuel economy standards for internal combustion (ICE) vehicles. Ever-increasing pressure on ICE vehicle manufacturers from governments around the world, as well as tax incentives for EVs, mean the writing is on the wall, even if the transition in the U.S. is a long one.
Meanwhile, it seems there are new competitors jumping into the EV space every day.
Expensive and cheap
A problem for new investors in the sector is runaway share prices for some of the best-known and rapidly growing companies.
Shares of Tesla are up 600% this year. This means the stock has gotten way ahead of analysts’ estimates and price targets. Among 36 sell-side analysts polled by FactSet, only 13 rate the shares “buy” or the equivalent. The consensus price target of $396.40 is 32% below the stock’s closing price of $584.76 on Dec. 1. The shares trade for 162 times the consensus earnings estimate for the next 12 months. Of course, the analysts’ 12-month horizons for price targets may be considered too short by long-term investors.
Nio Inc.’s NIO, +5.77% American depositary receipts closed at $45.36 on Dec. 1, up more than 10-fold this year, but down 15% from a week earlier. Among 13 analysts covering Nio, nine rate the shares a buy, but the consensus price target is lower: $42.25. There is no price-to-earnings ratio available for Nio, as the company is expected to continue operating at a loss.
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Getting back to GM, the shares were up 22% year-to-date through Dec. 2, but were trading for only 6.7 times the consensus earnings estimate for the next 12 months. That is a very low P/E ratio for a company with strong cash flow making such a deep commitment to a rapidly growing high-tech industry. (In comparison, the forward P/E ratio for the S&P 500 SPX, +0.17% is 22.3, according to FactSet.) Among the 17 analysts polled by FactSet who cover GM, 14 rate the shares a buy or the equivalent, and the consensus price target implies 10% upside over the next 12 months.
Three ETFs and a stock screen
As we discussed with five professional investors in September, it is a good idea to look beyond the vehicle manufacturers themselves when seeking investments that will rise as the world switches to EVs.
To come up with a broad list of related stocks, we looked at the holdings of three ETFs:
Adding the three portfolio groups together and removing duplicates left a list of 165 stocks, including 74 listed in the U.S.
Here are the 20 stocks covered by at least 10 analysts, with at least two-thirds at “buy” or equivalent ratings, with the most implied upside potential for the next 12 months, based on consensus price targets.
| COMPANY | TICKER | COUNTRY | INDUSTRY | SHARE 'BUY' RATINGS | CLOSING PRICE - DEC. 2 | CONSENSUS PRICE TARGET | IMPLIED 12-MONTH UPSIDE POTENTIAL | FORWARD P/E | TOTAL RETURN - 2020 THROUGH DEC. 2 |
|---|---|---|---|---|---|---|---|---|---|
| HONDA MOTOR CO. LTD. | JP:7267 | JAPAN | MOTOR VEHICLES | 100% | 2,899.50 | 3,678.13 | 27% | 10.3 | -4% |
| Iljin Materials Co. Ltd. | KR:020150 | South Korea | Electronic Production Equipment | 100% | 46,800.00 | 59,000.00 | 26% | 29.4 | 9% |
| Hyundai Mobis Co., Ltd | KR:012330 | South Korea | Industrial Machinery | 96% | 242,500.00 | 302,500.00 | 25% | 8.1 | -5% |
| Hyundai Motor Co. | KR:005380 | South Korea | Motor Vehicles | 96% | 183,500.00 | 228,884.61 | 25% | 8.4 | 52% |
| Honda Motor Co. Ltd. ADR | HMC | Japan | Motor Vehicles | 100% | 28.36 | 34.63 | 22% | 10.0 | 2% |
| Ballard Power Systems Inc. | CA:BLDP | Canada | Electrical Products | 82% | 25.83 | 31.33 | 21% | N/A | 178% |
| Baidu, Inc. ADR Class A | BIDU | China | Internet Software/Services | 75% | 140.26 | 169.20 | 21% | 15.3 | 11% |
| KIA Motors Corp. | KR:000270 | South Korea | Motor Vehicles | 100% | 59,800.00 | 71,115.38 | 19% | 7.3 | 35% |
| Samsung Electronics Co. Ltd. | KR:005930 | South Korea | Telecommunications Equipment | 91% | 67,800.00 | 79,076.19 | 17% | 14.4 | 24% |
| Volkswagen AG Pref. | DE:VOW3 | Germany | Motor Vehicles | 74% | 147.36 | 169.81 | 15% | 6.0 | -13% |
| LG Chem Ltd. | KR:051910 | South Korea | Chemicals: Specialty | 97% | 809,000.00 | 930,862.06 | 15% | 26.8 | 155% |
| Samsung Electro-Mechanics Co. Ltd. | KR:009150 | South Korea | Electronic Components | 100% | 162,000.00 | 184,035.72 | 14% | 16.5 | 30% |
| Microsoft Corp. | MSFT | U.S. | Packaged Software | 91% | 216.21 | 243.92 | 13% | 32.0 | 39% |
| Siemens AG | DE:SIE | Germany | Industrial Conglomerates | 69% | 112.94 | 125.38 | 11% | 20.4 | 11% |
| Micron Technology, Inc. | MU | U.S. | Semiconductors | 80% | 67.08 | 74.23 | 11% | 18.6 | 25% |
| General Motors Co. | GM | U.S. | Motor Vehicles | 82% | 44.68 | 49.27 | 10% | 6.6 | 24% |
| NVIDIA Corp. | NVDA | U.S. | Semiconductors | 77% | 535.60 | 590.26 | 10% | 47.9 | 128% |
| Analog Devices, Inc. | ADI | U.S. | Semiconductors | 83% | 140.73 | 154.85 | 10% | 24.9 | 20% |
| Magna International Inc. | CA:MG | Canada | Auto Parts: OEM | 67% | 80.37 | 87.22 | 9% | 9.2 | 17% |
| Alphabet Inc. Class A | GOOGL | U.S. | Internet Software/Services | 88% | 1,795.36 | 1,929.15 | 7% | 30.3 | 34% |
FactSet
The table includes a lot of data, including forward P/E ratios, which you can see if you scroll to the right. Share prices and targets are in local currencies.
