Electric vehicles or EVs are battery-powered automobiles that don’t require fuels such as gasoline or diesel. Several countries globally aim to incentivize residents to purchase EVs due to concerns over climate change. So, the demand for EVs is all set to explode all over the world in the upcoming decade, making these stocks top bets for long-term growth investors.
Let’s look at the top two EV stocks investors can consider buying right now.
An industry leader - Tesla
Tesla (NASDAQ: TSLA) is the most popular electric vehicle manufacturer globally. In 2021. Tesla delivered 936,000 vehicles, with Q4 shipments standing at 308,000. Tesla has created massive wealth for investors in the past decade.
Tesla went public in June 2010 at a split-adjusted price of $1.13 per share. Right now, Tesla stock is trading at $305. So, a $1,000 investment in TSLA stock would have returned close to $270,000 right now.
Tesla continues to march ahead despite a challenging macro environment. It had to contend with chip shortages and factory shutdowns in China, but the company is on track to deliver one million EVs in 2022. In the first six months of the year, Tesla delivered 564,743 EVs.
Due to its first mover advantage and exceptional execution, Tesla reported a net income of $5.5 billion in 2021, up from just $721 million in 2020.
Tesla is forecast to increase sales by 57% to $84.45 billion in 2022 and by 43.7% to $121 billion in 2023. So, TSLA stock is priced at 7.65x 2023 sales which is quite steep. But a market-leading growth stock commands a premium valuation.
Further, Wall Street expects Tesla to more than double its adjusted earnings from $2.26 per share in 2021 to $5.85 per share in 2023, valuing it at 52x forward sales.
A Chinese heavyweight
One of the largest electric car manufacturers in China, NIO (NYSE: NIO) should also be part of your shopping list if you are hunting for EV stocks. Between its IPO in September 2018 and January 2021, NIO stock rose 520% and hit an all-time high of $62. It's currently trading at $21, which is 66% below record highs.
Nio has a diversified portfolio of EVs. In March, it launched the ET7, an electric sedan, while it began deliveries of the ES7 EV SUV in Q2 of 2022. Nio also emphasized it will add a new mid-sized sedan to its EV lineup, which will be called the ET5.
In the June quarter, Nio increased sales by 21% year over year to $1.4 billion. Comparatively, vehicle deliveries rose by 14% to 25,059 units. The company’s sales growth was the lowest in the last nine quarters, while deliveries slumped by almost 3% on a sequential basis.
Similar to Tesla, even Nio has to grapple with supply chain bottlenecks, semiconductor chip shortages, and higher commodity prices. These headwinds meant Nio reported a net loss of $411 million in Q2, an increase of 370% year over year. In fact, net losses also rose 54% sequentially.
Nio will have to scale up production and deliveries in the second half of 2022 and narrow its losses considerably. The company expects deliveries between 31,000 and 33,000 units in Q3, while sales are forecast between $1.9 billion and $2.03 billion.
Analysts tracking NIO stock expect revenue to rise from $5.4 billion in 2021 to $15 billion in 2023. So, it's valued at less than 2.5x forward sales, which is quite cheap compared to Tesla. Further, Nio is also forecast to narrow losses from $1 per share in 2021 to $0.21 per share in 2023.