3 EV Stocks that I am Loving in July – and Why
Currently, analysts and industry data are reporting that the U.S. electric vehicle (EV) market is not growing fast enough.
Unsold EVs are stacking up at automaker’s dealerships and price cuts are short-term pauses towards the market growth. In fact, according to Cox data, U.S. dealers have more than 92,000 EVs in stock. This number represents new vehicle inventories up 74% and more than 3 times the number last year.
If conditions worsen and EV production outpaces demand, automakers will have to either cut prices and profit margins or slow their overall assembly lines. However, prominent players in the EV industry, such as Volkswagen and Ford, have been seeing strong demand for their products but not enough acceleration in product production. These companies have announced that they are increasing capacity for their products well above current sales to fit consumer demand.
In particular, I have noted three EV stocks that are growing despite these external factors.
The Albemarle Corporation (ALB)
The Albemarle Corporation (NYSE:ALB) is an American chemical manufacturing company that specializes in lithium, bromine, and chemical catalysts. Since 2020, Albemarle has been the largest provider of lithium for EV batteries in the world.
Albemarle has healthy financials, with a Q1 2023 normalized EPS of $10.32 beating analyst expectations by $3.28. Albemarle demonstrates superb growth in the specialty chemicals market. They showed revenue of $2.58 billion growing at a 141.9% CAGR YoY and 20 times over the sector median. A gross profit margin of 44.5% indicates that Albemarle can convert its growing revenue to profit efficiently. Lastly, strong management delivered 48.8% ROCE TTM and 20.9% ROTA, both of which are over 4 times the sector median.
With the increased demand for lithium for advancing batteries and other specialty chemicals, this market is expected to reach a valuation of $1 trillion dollars by 2030 at a 5.5% CAGR. ALB will benefit as well.
Albemarle has many growth catalysts. This May, Albemarle announced a 5-year partnership with Ford Motors. They’ll deliver 100,000 metric tons of battery-grade lithium hydroxide for approximately 3 million future Ford EV batteries starting in 2026. Albemarle further revealed plans for reopening an old lithium mine in Kings Mountain, North Carolina, reaching full operations by 2027.
The company is also investing $1.3 billion to build a new lithium processing plant in South Carolina. It’s capable of producing up to 100,000 metric tons of battery-grade lithium hydroxide per year. By developing partnerships with EV manufacturers and setting up a pipeline to manufacture battery-grade lithium hydroxide in the U.S., Albermarle is poised to drive up revenue in the future.
With ALB stock up 9.5% YTD and a buy rating from 14 analysts averaging a 12-month 9.11% upside, Albermarle is a buy stock. Proof lies within its healthy financials, a growing specialty chemical market with the increase of EVs, and growth catalysts that all suggest a positive outlook in the future.
ChargePoint Holdings (CHPT)
ChargePoint Holdings (NYSE:CHPT) provides charging technology in North America and Europe across commercial, fleet, and residential verticals. ChargePoint’s networked charging solutions can charge most types of EVs, regardless of manufacturer.
The company’s strong performance in its fleet and European segments allowed it to exceed revenue expectations. Total revenue was $130.03 million, experiencing 59.3% YoY growth. Networked charging systems revenue of $98.3 million experienced 65% growth, and subscription revenue of $26.4 million saw 49% growth.
This quarter’s revenue results highlight the significant competitive advantage of ChargePoint’s diversification across regions and verticals. ChargePoint even managed to exceed revenue despite weaker demand from residential and commercial customers, a result of the uncertain economic climate.
Another growth catalyst of the company is the continued expansion of EVs. In Europe, plug-in EV registrations increased 25% YoY. And in the U.S., EV sales have continued to grow at a healthy rate of 63% YoY, notably outpacing the general car market. In addition, the number of EV charging ports in the U.S. is estimated to increase 4 times by 2027. This has ChargePoint in an excellent position for expansion.
Even though CHPT stock has fallen 36.95% YoY, experts still strongly believe in ChargePoint’s growth. Nineteen analysts report mean 1-year price targets suggesting additional upside. All in all, ChargePoints unique business model allows for consistent growth despite external factors. And with EV continued growth sales, the company has a bright future ahead.
Onsemi (ON)
ON Semiconductor Corp, or Onsemi (NASDAQ:ON), is a rapidly growing American semiconductor manufacturer and supplier. Unlike traditional semiconductor producers, Onsemi utilizes a silicon carbide chip that is able to withstand much higher voltages, temperatures, and frequencies, making them a superior choice for EVs.
ON stock has grown an impressive 56.81% year to date, and its latest quarter’s earnings beat projections. Its Q1 2023 revenue of $1.96 billion exceeded estimates by $34.49 million, and its EPS of $1.19 surpassed forecasts by $0.11.
As Onsemi was not already exhibiting strong performance, management reported key changes they are planning to further boost future growth. First, the company intends to switch to a Fab-Liter manufacturing model, which is designed to improve its long-term cost structure. Additionally, Onsemi aims to expand its already-strong competitive advantage by expanding the capacity of its dies (an electric material used in semiconductors). Together, these adjustments will act as catalysts to drive up ON stock.
Companies like Onsemi are something to keep an eye on today, especially given the swift popularity growth EVs are experiencing in our increasingly environmentally-conscious society. In fact, the EV market, valued at $384.65 billion in 2022, has a CAGR of 17.8% and is expected to rise to $1,579.10 by 2030.
Ultimately, this trend is advantageous for Onsemi, considering a climbing number of EV automotive and industrial businesses are going to it. Its YoY revenue growth from auto and industrial customers was 22.6%, and a similar pattern is expected in the future. Overall, Onsemi’s current momentum, alongside its massive competitive advantage and optimistic-looking future, will bring nothing but further growth for the stock.
On the date of publication, Michael Que did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
