Top 5 Stocks to Play the EV Revolution

BWA NVDA GM TSLA

Electric vehicles (EV) are the future of the automobile industry. Despite the coronavirus pandemic, the EV market is getting more electrified than ever. There is an enormous amount of optimism in the space. Retail investors are cashing in on the same by aggressively buying EV stocks. Advancement in technologies, stricter emissions and fuel-economy targets, as well as increasing commercial viability of EVs — both in terms of affordability and charging infrastructure — are boosting the environment-friendly EV market. Investors are intrigued by automakers that look for solutions to lower global carbon emissions for providing a cleaner energy future.

This year, IPO filings by green vehicle makers — including Nikola, Li Auto, Hyliion and Fisker — have been on the rise to capitalize on the EV frenzy. With major automakers, pure EV plays, and small as well as mid-size startups actively focusing on the development of environment-friendly vehicles, the race to EV supremacy is only going to get fiercer in the upcoming years.

EV sales across the globe are projected to grow 50% or more in 2021 compared with ICE expected sales growth of a meager 2-5%, as predicted by analysts at Morgan Stanley, quoted in a MarketWatch article. Global EV penetration is projected to jump from 3% to 31% by 2030. Per a Deloitte Report, the EV market is estimated to reach 31.1 million units by 2030 from 2.5 million units in 2020, witnessing a CAGR of 29% during the forecast period.

If you want to bet on the greener mode of transportation, the obvious choice will be pure-play EV players and the legacy automakers who are investing large sums of money to change gears to the electric mode. However, one can also tap the booming EV market with battery manufactures, lithium players, auto suppliers, semi conductor stocks and charging companies. In this write-up, we shall highlight five stocks that you can invest in to cash in on the EV euphoria.

Our Picks

Tesla (TSLA - Free Report) : Well, we are taking about EVs and despite Tesla’s lofty valuations, this EV king tops the list. Although electric cars occupy a small portion of the global automobile market, Tesla has acquired a substantial market share within this niche segment. With Model 3 sedan being its flagship vehicle, Tesla has established itself as a leader in the EV segment.

For full-year 2020, Tesla has maintained the target of exceeding 500,000 vehicle deliveries, indicating an uptick of 36% year over year despite production interruptions amid coronavirus woes. It has a first-mover advantage in the EV space with high range vehicles, superior technology and software edge. Robust Model 3 demand, ramp up of Model Y production, significant Shanghai Gigafactory progress, amazing line-up of upcoming products and aggressive expansion efforts bode well for this Zacks Rank #1 (Strong Buy) firm. The Zacks Consensus Estimate for its 2021 earnings indicates a year-over-year increase of 58.8%. You can see the complete list of today’s Zacks #1 Rank stocks here.

General Motors (GM - Free Report) :This legacy automaker is pulling out all the stops to demonstrate its EV efficiency. It has adopted an “all-in” electrification strategy, whereby it will gain a competitive edge in batteries, software, vehicle integration, manufacturing and customer experience to make EVs the key catalyst for boosting the company’s profitability.

The third-generation global EV platform powered by Ultium batteries will be the heartbeat of the U.S. auto giant’s electrified future. The Ultium modular battery platform will power the automaker’s new electric cars, starting with the Cadillac Lyric model. This Zacks Rank #1 automaker is also expediting plans to roll out electric cars and trucks over the next five years, and projects to spend $27 billion by 2025 on the initiative. It is slated to unveil 30 EVs by 2025, two-thirds of which will be available in North America. Strategic collaborations with Honda and EVgo are likely to rev up General Motors’ EV game. The Zacks Consensus Estimate for its 2021 earnings indicates a year-over-year increase of 58.2%. 

BorgWarner Inc. (BWA - Free Report) : Investors can capitalize on the rosy EV market prospects by investing in firms that provide automakers with power solutions. The companies are focused on innovation and technology development, and expect that hybrid and electric technologies will bolster their top line, going forward. In this regard, BorgWarner makes a promising bet.

In the long term, it expects hybrid and electric technologies to be major revenue drivers. Electrification programs are likely to drive this Zacks Rank #2 (Buy) company’s backlog. From 2021 through 2023, net new backlog is expected to be at least $2.1 billion. With a diverse product range, products that cater to hybrid and electric vehicles are projected to lead to more business gains by 2023. BorgWarner’s balance sheet strength and investor-friendly moves boost investors’ confidence. The Zacks Consensus Estimate for its 2021 earnings indicates a year-over-year increase of 58.2%. 

NVIDIA Corporation (NVDA - Free Report) : Technology is changing the dynamics of the auto industry and semiconductors are at the heart of technology. The more technologically advanced the EV, the more semiconductors it requires. So basically, chips matter when it comes to EVs and investors can play the EV revolution with semiconductor stocks as well. One such stock worth betting on is NVIDIA, which presently carries a Zacks Rank #2.

The company’s launch of Drive AGX Orin deserves a special mention. It is a highly advanced software-defined platform for autonomous vehicles and robots powered by a new system-on-a-chip called Orin that consists of 17 billion transistors. It was recently selected by Li Auto in a bid to accelerate the development of its next generation of EVs. Higher sales of artificial intelligence cockpit solutions and traction witnessed by automotive platforms for infotainment systems position the company well to capitalize on the EV boom. The Zacks Consensus Estimate for its fiscal 2022 earnings indicates a year-over-year increase of 18.7%. 

Panasonic Corp : With batteries being the most crucial component of a green vehicle, the overall cost, performance and driving range of an electric car depends mostly on the same. With electric car revolution set to take off in a big way, the battery industry is bound to witness exponential growth in the coming years. Panasonic, which currently carries a Zacks Rank #2, seems an attractive bet.

The company is one of the key players in the development of next-generation lithium-ion batteries for green vehicles. Continuous research and cutting edge technology have kept Panasonic at the forefront of battery development. Its advanced lithium-ion battery tech offers improved energy density, lower costs and improved driving range. Strategic partnerships with auto biggies like Tesla and Toyota are likely to boost the firm’s prospects. Notably, the company is targeting zero cobalt in battery cells and plans to commercialize cobalt-free batteries in a few years. The Zacks Consensus Estimate for its fiscal 2022 earnings indicates a year-over-year increase of 82.1%. 

Zacks Top 10 Stocks for 2021

In addition to the stocks discussed above, would you like to know about our 10 top tickers for the entirety of 2021?

These 10 are painstakingly hand-picked from over 4,000 companies covered by the Zacks Rank. They are our primary picks to buy and hold. Start Your Access to the New Zacks Top 10 Stocks >>

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