The electric vehicle market is on the verge of another record-breaking year as global sales are projected to account for close to one-fifth of the overall car market. This significant growth marks a major transformation in the automotive industry and carries profound implications for the energy sector, particularly for oil.
As per the latest edition of the International Energy Agency's annual Global Electric Vehicle Outlook, the worldwide sales of electric cars surpassed 10 million units in 2022. Moreover, this remarkable momentum is expected to continue with an estimated 35% increase in sales this year, reaching an impressive 14 million units. The rapid adoption of EVs has elevated their share of the total car market from approximately 4% in 2020 to 14% in 2022, and this figure is predicted to rise to 18% this year, according to the IEA's projections.
Investing in the EV industry
Delving into the EV industry is like embracing a future where clean energy reigns supreme and fossil fuels become obsolete. As we witness the current unprecedented advancements in this sector, investors are presented with an opportunity to influence and benefit from a more sustainable future. These are high-potential EV stocks, not just in the realm of profits, but also in their capacity to drive significant change.
Each holds the promise of growth, influenced by increasing consumer awareness, government support and technological breakthroughs. The trick lies in identifying those that are poised to lead the race.
However, transitioning to this unique market is not simply about seizing the potential for incredible financial gain. It as also about investing in a world where technology and sustainability converge. It is about placing bets on companies that value innovation as much as they do profitability.
But before assessing these stocks, it is essential to conduct thorough research to understand their worth. To access the latest and most comprehensive insights, investors can utilize the All-in-One Screener, a Premium GuruFocus feature.
Brace yourself for a thrilling ride as we buckle up to talk about two of the top-performing EV stocks this year.
Li Auto
With a staggering year-to-date return of 81.98%, Li Auto Inc.'s (LI, Financial) wheel-spinning performance lands it squarely among the top EV companies to consider.
Robust 96.48% year-over-year revenue growth and a breathtaking 8,655.75% increase in net income is a lucid testament to Li Auto's successful business model and robust operational capabilities. But that's just the beginning. The company's first-quarter earnings per share outperformed expectations by a wide margin, highlighting its ability to maneuver the industry's competitive landscape. This is indeed a company that's shifting gears and accelerating in the fast lane.
Li Auto has also been setting new delivery records, indicating it has solid demand despite the pricing war. For instance, the company delivered 28,277 vehicles in May, a 146% year-over-year increase. Meanwhile, it reached an even more impressive record of 32,575 deliveries later, showcasing its high operating capabilities.
As a result, the stock is not as affordable as it once was. Despite the recent surge, the price-sales ratio remains below its all-time high. Over the past decade, the multiple has fluctuated within a range of 2.42 to 38.34, with the current ratio at 4.8. This indicates that while the stock may not be as cheap as before, it still holds a favorable position compared to historical highs, potentially making it an attractive option for investors seeking exposure to the thriving EV market.
Overall, Li Auto is not just any EV company; it is one that has been consistently revving up returns, making it a potent force in the high-potential category.
Rivian Automotive
Despite a topsy-turvy performance, Rivian Automotive Inc. (RIVN, Financial) has made a notable impression on Wall Street with a robust year-to-date return of 48.85%.
Shaping up as one of the EV stocks to watch, Rivian's roller-coaster journey is quite the spectacle. The first-quarter earnings report showed an impressive 595.79% leap in revenue to $661 million. Notwithstanding, the company grappled with a net loss of $1.35 billion, an improvement of 15.32% year over year, albeit a sobering reminder of the challenging road ahead.
Despite the solid growth, Rivian still fell short of analysts' revenue estimates, illuminating ongoing supply chain woes. While the company has drawn a bead on producing 50,000 vehicles for fiscal year 2023, there are wisps of skepticism stirring due to a history of missed targets. Remember, EV companies are in a tight race, with several competitors downsizing their production outlooks due to similar constraints. However, Rivian, no slouch in the resilience department, strives to stick to its ambitious production target.
Regardless of the company's significant losses and the potential need for future capital, the stock has shown impressive resilience, posting a sizeable upswing. Recent acquisitions, including Swedish EV route planning app maker Iternio, and surpassing production and delivery targests have contributed to a positive market response. It seems that investors can discern a silver lining in Rivian's cloud of challenges.
However, it remains critical for potential investors to evaluate whether Rivian's current optimism can sustain its position in the competitive EV market. One significant aspect of this analysis is the company's valuation.
The valuation of Rivian is measured using the price-sales ratio, which compares the company's market capitalization to its total revenue. Over the last decade, Rivian's sales multiple has fluctuated from a low 5.08 to a high of over 129,000. The median ratio is 50.53. Currently, the multiple stands at 10.82.
Further, it is important to consider that Rivian remains unprofitable. However, according to Chief Financial Officer Claire McDonough, it is on track to achieve profitability by the second half of 2024. Since this goal is still some time away, it is an additional risk factor to consider.
Ultimately, Rivian's journey underscores the intense dynamism of the EV market - an arena laden with huge profits, should one play their cards right.
