Electric vehicles, EVs, are getting a lot of headlines, and rightly so. There is a concerted push, both from governments and civil society entities, to promote EVs over internal combustion engine cars, and that has resulted in a global EV market currently valued at $250 billion. Almost all major automakers produce EV models, and for several years small, independent companies have sprung up in the larger markets. By 2028, the EV market is expected to sell 17.07 million vehicles, generating a market volume of more than $900 billion.
For the retail investor, this means EV stocks are an opportunity area. Expected growth of that size doesn’t happen often, but when it does, it means entire industries are changing. Current EV production won’t come close to meeting projected demand for 2028, and companies that can expand to meet that demand will thrive. The trick is to find them.
Wall Street’s professional equity analysts rise to the challenge. They’ve scoured the auto industry for EV stocks that should rise with increased demand — and from investment firm Stifel, analyst Stephen Gengaro has singled out two stocks that investors should take a second look at. These are both Buy-rated stocks and Gengaro sees 90% gains or better for each of them.
According to TipRanks’ database, Gengaro isn’t alone in thinking these stocks have a lot to offer investors; both are rated Strong Buys by the analyst consensus. Let’s take a closer look at that.
ChargePoint Holdings (CHPT)
We begin our look at EV stocks with ChargePoint, a leader in the charging station niche. While ChargePoint doesn’t build actual cars, it does manufacture, sell and install the vital charging infrastructure that will transform electric vehicles from a novelty into a practical transportation option. The company offers various charging station options for businesses, for fleet use and for individual drivers.
The company has been in business since 2007 and its network of charging stations is so extensive that ChargePoint can boast of someone plugging in every second. That equates to more than 172 million loads delivered over the years, and ChargePoint claims 76% of Fortune 500 companies among its customers. It’s an impressive record.
ChargePoint delivered decent financial results in the recently reported first quarter of fiscal 2024. The company posted revenues totaling $130 million, a strong 59% year-over-year increase – beating analysts’ expectations by $130 million. 1.67 million. In the end, ChargePoint, like many advanced technology-focused companies, is currently running at a loss. The company’s GAAP earnings per share of a loss of 23 cents was in line with the forecast, while its non-GAAP figure, a loss of 15 cents per share, was 2 cents better than forecast.
Looking ahead, ChargePoint leads to fiscal Q2 revenue in the range of $148 million to $158 million; this would represent a 41% year-over-year gain at the midway point. ChargePoint has sufficient resources to continue its expansion, with $313.7 million of cash on its balance sheet at the end of its fiscal first quarter (ending April 30).
For Stifel’s Stephen Gengaro, this all adds up to a stock that investors should seriously consider, describing it as his “favorite EV charging name.” He is impressed by ChargePoint’s solid position in the charging market and its ability to build on that position.
“We reiterate our belief that CHPT is well positioned to benefit from the expected strong growth in electric vehicle sales and demand for chargers in the coming years. We expect the company to deliver solid revenue growth in 2023-25+, and appears on track to deliver positive free cash flow by the end of calendar 2024,” said Gengaro.
Gengaro then rates CHPT stock as a buy, and his $17 price target implies a one-year gain of ~94% for the stock. (Click here to view Gengaro’s track record)
The Street gives CHPT stock a generally moderate buy consensus rating, based on 14 recent analyst ratings, including 10 buy and 4 hold. The stock’s $15.40 average price target suggests an upside of ~75% over the next 12 months, from its current trading price of $8.79. (To see CHPT stock forecast)
Kano, Inc. (GOEV)
Next up is Canoo, a California-based maker of a multi-purpose EV platform, a vehicle chassis that can be customized to fit a variety of EV types and models. Canoo is working on different types of EV vehicle designs based on this common platform. Final designs include a ‘lifestyle’ vehicle, a light to medium-duty pickup truck and a van aimed at the ‘last mile’ niche. The latter is an operational mode in which EVs have proven successful, as their combination of short to medium range and zero emissions is a good fit for stop-and-go urban driving.
Canoo’s EV chassis incorporates several innovative elements. The company’s vehicle design includes independent electric motors on all four wheels, which reduces the weight and complexity of the powertrain. In addition, it includes an electrically powered control that is ‘drive-by-wire’ possible. The dashboard is streamlined and offers the driver and front passenger a wide field of vision. In addition, the steering column can be moved between the driver and front passenger seats. The vehicle comes with wireless connectivity and users can download a mobile app that allows them to track the vehicle from anywhere.
With all this, it is important to note that Canoo has not yet put its vehicle into regular production. The company recently signed agreements with Walmart and Zeeba to purchase 4,500 and 3,000 vehicles, adding to an already significant backlog. But – the company burns money and struggles to raise capital. In 1Q23, Canoo reported no sales and a GAAP net loss of 22 cents per share, 4 cents per share worse than expected.
Stifel’s Gengaro acknowledges that this is a highly speculative stock, not for the risk averse, but believes that, if Canoo can survive its financial difficulties, the rewards will be worth it.
“We view Canoo as a high-risk, high-reward stock due to ongoing funding needs and the risks associated with ramping up production volumes to profitable levels. We believe demand for Canoo’s vehicles is strong, supported by a committed backlog of 18,000 units, an additional $2.8 billion in orders (~60,000 units) and our belief in both the consumer and commercial versions of Canoo are electric cars,” Gengaro explained.
“We believe there are three key drivers for the stock over the next 12-24 months, including 1) reaching production targets; 2) financing operations; and 3) delivering positive gross margins. In our view, these three are closely related and starting funding,” the analyst added.
To that end, Gengaro rates GOEV stock a buy, and its $1.50 p
rice target indicates room for a 207% gain over the next year.
Gengaro isn’t the only one willing to take a risk with GOEV; the stock has 3 recent analyst ratings, all positive, for a unanimous Strong Buy consensus. The shares are trading for just $0.49, and the $4.50 average price target implies a skyrocketing potential appreciation of ~819% over the one-year horizon. (To see Canoo Stock Forecast)
To find great ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a tool that brings together all of TipRanks’ stock insights.
disclaimer: The opinions expressed in this article are solely those of the named analysts. The content is for informational purposes only. It is very important to do your own analysis before making an investment.