Three Notable Electric Vehicle Shares to Invest in during November
Multiple electric vehicle (EV) shares surged during the buying craze of growth and meme stocks in 2021. However, in 2022 and 2023, numerous these shares dwindled as their growth diminished and rising interest rates burst their exaggerated valuations. The sluggish Chinese economy and an EV price war intensified this strain.
However, with interest rates predicted to decrease, several of these beaten-down EV shares appear to be an unfairly priced growth opportunity. Let's analyze three of these shares -- Nio (NIO -1.74%), Li Auto (LI -2.59%), and Joby Aviation (JOBY 1.97%) -- to understand why they are worth contemplating in November.
1. Nio
Nio is a Chinese EV manufacturer producing electric sedans and SUVs. It distinguishes itself from competitors through swappable batteries that can be quickly exchanged at its swapping stations, serving as a swifter alternative to conventional chargers.
Nio debuted its initial vehicles in 2018. Annual deliveries grew around 8 times from 20,565 in 2019 to 160,038 in 2023, while annual revenue increased at a compound annual growth rate (CAGR) of 63%. Nevertheless, growth declined in 2022 and 2023 due to supply chain constraints, weather-related disruptions, macroeconomic challenges in China, and the continual pricing war within the EV market.
This slowdown alarmed the investors, but Nio boosted deliveries by 36% year-over-year in the first nine months of 2024 -- contrasting its 33% year-over-year growth in the first nine months of 2023. Its vehicle margins further stabilized due to increasing market share, higher sales of premium vehicles, and the introduction of its economical Onvo smart vehicles in China. Expansion into Europe is also underway, although plans may be impacted by new tariffs on Chinese EVs.
Despite these challenges, analysts anticipate Nio's revenue to expand at a CAGR of 28% from 2023 to 2026. It remains non-profitable, but its stock seems undervalued at less than 1 times next year's sales. It could eventually warrant a higher valuation as it surmounts its near-term hurdles.
2. Li Auto
Li Auto is a prominent Chinese producer of plug-in hybrid electric vehicles (PHEVs). It offers four models of plug-in hybrid SUVs (L6, L7, L8, and L9), and its first fully electric mini-van, the Li Mega, was unveiled this year.
Li began delivering its initial vehicles at the end of 2019. From 2020 to 2023, annual deliveries skyrocketed more than 11 times, from 32,624 to 376,030. Annual revenue soared at a CAGR of 136% as well. Li became profitable for the first time in 2023.
Li's profits persisted even during the construction of an extensive network of supercharging stations across China. By the end of the last quarter, it operated 894 supercharging stations with 4,286 charging stalls, and had 479 retail stores in 145 cities.
Li faces some immediate challenges. The EV price war continues to squeeze vehicle margins, while escalating trade tensions and new tariffs have postponed its first overseas expansion into the U.S., the Middle East, and other overseas markets.
However, from 2023 to 2026, analysts expect Li's revenue to rise at a CAGR of 25%, as net income increases at a CAGR of 15%. These remarkable growth rates for a stock trading at just 17 times forward earnings and less than 1 times next year's sales make Li a compelling investment opportunity, much like Nio.
3. Joby Aviation
Joby Aviation develops electric vertical takeoff and landing (eVTOL) aircraft. Its inaugural commercial eVTOL aircraft, the S4, seats one pilot and four passengers, boasts a range of up to 100 miles on a single charge, and reaches a top speed of 200 mph. Primarily designed as a cost-effective, quicker, quieter, and greener alternative to traditional helicopters, it also allows for easier landing in urban areas, making it an ideal choice for local air taxi services.
Joby currently holds a $131 million contract with the U.S. Department of Defense (DOD) to supply up to nine eVTOL aircraft to the U.S. Air Force. It delivered its first aircraft to Edwards AFB last year and plans to deliver its subsequent two aircraft to MacDill AFB in 2025. Joby is also working on a hydrogen-powered eVTOL aircraft, which could potentially achieve five times the range of its initial battery-powered counterparts.
Joby, nevertheless, remains a highly high-risk stock. Analysts anticipate it to generate merely $395,000 in revenue this year, with a net loss of $467 million. However, by 2026, they expect it to accumulate $104 million in revenue, with a net loss of $532 million.
Given its anticipated expectations and a valuation of $3.56 billion, Joby's stock price isn't overly expensive, sitting at 7 times its forecasted revenue for 2026. Toyota and Delta Air Lines still maintain significant stakes in Joby's progress, suggesting that its stock could potentially skyrocket further as more corporations opt for Joby's eVTOL aircraft over traditional helicopters.
After analyzing these EV stocks, investors might consider allocating their funds to undervalued growth opportunities, such as Nio and Li Auto, as interest rates are predicted to decrease. This decrease could help improve the financial performance of these companies, making their stocks more attractive.
Investing in Joby Aviation, despite its high risk, could be a lucrative move due to the significant stakes held by Toyota and Delta Air Lines. Their involvement suggests that Joby's eVTOL aircraft could gain widespread acceptance, potentially leading to a significant increase in its stock price.
