The electric vehicle market has taken a huge leap forward in the last decade, so what EV stocks should investors be keeping an eye on in 2021?
Dec. 28, 2020
Governments around the world are cracking down on gas-powered vehicles. California declared that the sale of new gasoline-fueled motors will be banned in the state by 2035, whilst the U.K announced similar proposals to be in place by 2030.
As of August 2020, the total number of plug-in electric cars sold in the U.S. is estimated at 1.6 million units, of which 164,672 were sold in the first eight months of 2020. However, industry predictions suggest we’ve barely scratched the surface. As countries experience the harsh realities of climate change, many individuals are turning to electrical vehicles in a bid to help the environment. So, what EV stocks should we have our eyes on for 2021?
Tesla (NASDAQ: TSLA) being the first on our list comes as no surprise, as the automaker has dominated the market this year. Back in May, it was confirmed that Tesla sold more cars in the first quarter of 2020 than its next two competitors, Volkswagen and Renault, combined.
Tesla stock has skyrocketed this year. Although the stock is still in its volatile growth stage, investors consider Tesla as an innovative technology platform for electric vehicles.
Tesla reported revenue growth of $8.77 billion, up 39.2% year-over-year in its third-quarter report in 2020. Elon Musk’s company also ended Q3 with over $14.5 billion, this strong liquidity suggests it will not sell more of its own stock. Tesla is still on track for delivering 500,000 vehicles by the end of 2020.
In November, the S&P 500 announced that Tesla will be joining the list and with a market capitalization of over $420 billion, it is the sixth-largest company in the group. The addition to the S&P gives Tesla’s stock steadier ownership which should ease volatile swings.
Chinese-owned NIO, now worth over $70 billion, is far away from the dark days of virus-ridden China. Now the economy is back thriving and Chinese people now have more disposable income for luxury EVs.
Strong September earnings sparked a 40% surge in NIO’s stock in October. The company delivered 4,708 electric vehicles in September, representing a 133% growth in units year-over-year. NIO also has an impressive earnings history, beating consensus EPS estimates in three out of the four last quarters.
While we wouldn’t dream of calling NIO ‘the next Tesla’ yet, it sure does have a lot of similarities to Musk’s company. Like Tesla, NIO has focused on a handful of models to start with. Its financials are also not unlike Tesla’s; revenue is increasing rapidly as well as its debt load. As you may remember, Tesla did not report consecutive quarters of profitability until 2018. Would-be NIO investors should expect to wait for quite some time before the company is profitable.
NIO is considered by many in China to be superior in quality to Tesla. This may result in the company potentially taking some of Tesla’s market share, making NIO a very interesting EV stock to watch in 2021.
GM is pouring around $27 billion over the next five years into electric and autonomous vehicles. The company is planning on launching 30 new electric vehicle models by 2025, with over two-thirds of them being available in North America.
This goal relies heavily on GM’s Ultrium battery, the battery pack will double the energy density of today’s batteries at half the cost. GM managed to beat Tesla in Consumer Reports which concluded that the former was better at both keeping the driver engaged and dealing with an unresponsive driver.
Another great thing about GM? It’s profitable right now, while other EV manufacturers may never stop burning through cash. Its stock still trades for less than 10 times the average analysts’ expectations for full-year earnings. General Motors is a good option for investors who do not want to be exposed if the EV market is a bubble.
GM is set to create around 3,000 tech jobs by investing heavily in engineering, design, and IT. This investment proves that the company is accelerating its move into the EV market, its President Mark Reuss stated GM is “committed to further developing the software we need to lead in EVs.” However, investors are not backing his vision by buying GM stock as Tesla remains the leader in the EV in the industry.
GM still has a long road ahead before they catch up. Analysts predict that GM’s stock will soar in value by May 2021, so would-be investors should consider buying the stock early next year to have a better entry price.
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