Favorable government policies to encourage the transition to a cleaner future, including tax credits for electric vehicle (EV) buyers (and rising oil prices), should speed the shift to EVs in the coming decades.
Despite the current global semiconductor chip shortage, some EV manufacturers witnessed record sales in the third quarter. Increasing investments to ramp up semiconductor production should further drive the EV industry’s growth. Investor optimism about this space is evidenced by the Global X Autonomous & Electric Vehicles ETF’s (DRIV) 16.6% gains, compared to the SPDR S&P 500 Trust ETF’s (SPY) 8.2% returns over the past month. The global EV market is expected to grow at a 15.4% CAGR to $187.94 billion by 2026.
Given this backdrop, Wall Street analysts are optimistic about the upside potential of shares of EV manufacturers NIO Inc. (NIO), Li Auto Inc. (LI), Electric Last Mile Solutions, Inc. (ELMS), and Electrameccanica Vehicles Corp. (SOLO).
NIO Inc. (NIO)
Known as the ‘Tesla of China,’ Jiading-based NIO designs, manufactures, and sells smart and connected EVs that are integrated with next-generation technologies and artificial intelligence. The company’s products include its EP9 supercar and ES8 7-seater SUV. It provides home charging, power express valet service, and other power solutions that include access to public charging, access to power mobile charging trucks, and battery swapping.
NIO delivered 24,439 vehicles in the third quarter of 2021, representing a 100.2% year-over-year increase. As of September 30, 2021, its cumulative deliveries of the ES8, ES6 and EC6 reached 142,036 vehicles.
On May 24, 2021, NIO entered manufacturing agreements with Jianghuai Automobile Group Co., Ltd. (JAC) and its joint venture Jianglai Advanced Manufacturing Technology (Anhui) Co., Ltd., to continue manufacturing the ES8, ES6, EC6, ET7, and potentially other NIO models in the pipeline. JAC will expand its annual production capacity to 240,000 units, and Jianglai will be responsible for parts assembly and operation management. This should allow NIO to benefit from economies of scale in the future.
For its fiscal second quarter, ended June 30, 2021, NIO’s total revenues were $1.31 billion, representing a 127.2% rise from the prior-year period. Its vehicle sales have increased 127% year-over-year to $1.23 billion. The company had cash and cash equivalents of $2.69 billion as of June 30, 2021.
A $5.63 billion consensus revenue estimate for the current year represents a 120.6% rise from the prior-year period. Over the past month, the stock has gained 24.9% in price and closed Friday’s trading session at $42.29.
Of 10 Wall Street analysts, nine have rated the stock Buy, and one rated it Hold. The $59.91 average price target for the stock indicates a 41.7% upside potential.
Li Auto Inc. (LI)
Headquartered in Beijing, China, LI designs, manufactures, and sells smart electric sport utility vehicles (SUVs). The company offers Li ONE, a six-seat electric SUV equipped with a range of extension systems and smart vehicle solutions. LI sells peripheral products and provides related services, such as charging stalls, vehicle internet connection services, and extended lifetime warranties.
LI delivered 7,649 Li ONEs in October 2021, up 107.2% from the prior-year period. As of October 31, 2021, the year-to-date and cumulative deliveries of Li ONEs were 62,919 and 96,516, respectively.
LI’s total revenues rose 158.8% year-over-year to $780.44 million for its fiscal second quarter ended June 30, 2021. The company’s gross profit came in at $147.57 million, indicating a 266.9% increase from the prior-year period. The company had $1.87 billion in cash and cash equivalents as of June 30, 2021.
Analysts expect the company’s revenue to increase 158.5% from the prior-year period to $3.77 billion in the current year. Over the past month, LI gained 14.9% in price and ended Friday’s trading session at $31.
Five of six Wall Street analysts rating the stock have rated it Buy, and one rated it Hold. The stock is expected to hit $39.88 in price in the near term, representing a 28.7% upside potential.
Electric Last Mile Solutions, Inc. (ELMS)
ELMS in Auburn Hills, Mich., is a commercial electric vehicle solutions company that designs, engineers, manufactures, and customizes electric last-mile delivery and utility vehicles. The company intends to develop a hardware and software stack that allows electric control units (ECUs) to support over-the-air (OTA) updating and data collection.
On November 4, 2021, ELMS selected EVgo Inc. (EVGO), an operator of the nation’s largest public fast-charging network for EVs, as its first partner to enable large-scale deployments of EVGO’s charging solutions to ELMS’ commercial EV fleets. The solution includes transition planning, hardware procurement, infrastructure deployment, software and networking, operations and maintenance, and systems integration. ELMS and EVGO are looking forward to bringing the benefits of fleet electrification to more segments.
On October 20, 2021, ELMS announced the expansion of its global footprint into Canada. Owing to the country’s progress in its recent sustainability actions and the need for more delivery vehicles in a growing e-commerce market, setting up a presence in Canada provides a good market opportunity for the company’s all-electric commercial vehicles, and broadens its global capabilities in sales, engineering, supply chain, and advanced technology solutions.
ELMS had $171.53 million in cash and cash equivalents as of June 30, 2021. Over the past month, ELMS has gained 19.1% in price and ended Friday’s trading session at $8.03. All four Wall Street analysts rating the stock have rated it Buy. Analysts’ average price target of $15 represents an 86.8% upside potential.
Electrameccanica Vehicles Corp. (SOLO)
Based in Vancouver, Canada, SOLO is in the automobile and multi-utility vehicle business sector. The company operates through two business segments— Electric Vehicles (EV) and Custom build vehicles. The company’s products include SOLO, a single-seater EV, and Tofino, a two-seater electric roadster.
On October 21, 2021, SOLO completed its migration to SAP S/4HANA Cloud, leveraging the business-transformation-as-a-service, RISE with SAP. Implemented using automotive industry capabilities and best practices, SAP S/4HANA Cloud features AI, machine learning, RPA, and situation handling across finance, supply chain, manufacturing, sales, and distribution processes. This should enable SOLO to scale operations, future-proof its business, and obtain critical feedback to empower more informed operational decisions.
On October 14, 2021, SOLO signed a strategic agreement with Robert Bosch GmbH (Bosch), a leading global mobility solutions and industrials technology firm in Germany, to establish a service network of independent automobile repair shops approved by the Bosch Car Service Network that will support service and maintenance operations for SOLO EVs. SOLO is looking forward to a long-term partnership with Bosch.
For its fiscal second quarter, ended June 30, 2021, SOLO’s revenue came in at $298.80 million, representing a 2382.1% rise from the prior-year period. As of June 30, 2021, the company had $250.03 million in cash and cash equivalents.
The company’s revenue is expected to rise 302.7% year-over-year to $2.44 million for the current year. The stock has gained 12.1% in price over the past month and ended Friday’s trading session at $3.70.
The only Wall Street analyst rating the stock has rated it a Buy. The $12.25 price target indicates a 231.1% upside potential.
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NIO shares were trading at $43.45 per share on Monday afternoon, up $1.16 (+2.74%). Year-to-date, NIO has declined -10.85%, versus a 26.69% rise in the benchmark S&P 500 index during the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market. More...
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