TSLA: 2 Electric Vehicle Stocks and 1 ETF to Buy and Hold for 2021

Electric Vehicles are changing the dynamics of the automobile industry. Higher efficiency of these cars combined with zero emissions, have marked up their demand in the market. Approximately 4 million EV units are expected to be sold globally this year, doubling in just two years from 2 million sales in 2018, according to a report published by NetworkNewsWire.

While buying an electric car requires relatively higher upfront costs, their operating and maintenance costs are significantly lower than that of gas and diesel cars. Several tax incentives in the form of federal tax credits are also applicable on electric car purchases. These, combined with lower carbon footprint amid rising climate change concerns, are likely to boost the EV industry significantly in the upcoming years.

Stocks such as Tesla, Inc. (TSLA) and NIO Ltd. (NIO), and the KraneShares Electric Vehicles and Future Mobility Index ETF (KARS) should immensely benefit from the rising demand.

Tesla, Inc. (TSLA)

TSLA has been one of the best performing stocks during the pandemic, with 425.1% gains year-to-date. TSLA revolutionized the electric car industry through its top-of-the-line products that have higher efficiency and durability. Its record high share price led to a 5-for-1 stock split on August 12^th. The company reported profits for four consecutive quarters, following which analysts and investors speculated its potential inclusion in the S&P Dow Jones Indices. However, TSLA did not make the cut, leading to a huge sell-off.

The TSLA Model S was tested to be the safest car ever by National Highway Traffic Administration upon launch. TSLA is currently planning to launch three new electric vehicles in the near future, including a Tesla Cybertruck and 2 electric cars. It is currently planning to expand in Indonesia to ensure a steady supply of nickel, a key component in manufacturing car batteries.

TSLA is reportedly planning to launch its products in India in 2021. With a huge population and thereby market base, this expansion is expected to ramp up the profits for the company. CleanSpark software and services company recently partnered with TSLA to use its batteries for a Microgrid project in South America.

TSLA’s EV deliveries increased 7% year-over-year (subject to operating lease accounting) in the third quarter that ended September 2020. Its revenue increased 39% year-over-year to $8.8 billion this quarter, while gross profit rose 73% from the same period last year to $2.1 billion. TSLA’s net income and EPS rose 131% and 69%, respectively, over this period.

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The consensus EPS estimate of $0.75 for the fourth quarter ending December 2020 indicates a 82.9% rise year-over-year. The company also has an impressive earnings history, as it beat the street EPS estimates in each of the trailing four quarters. The consensus revenue estimate of $30.1 billion indicates 22.6% growth from the year-ago value.

TSLA has gained more than 765% since hitting its year-to-date low of $70.10 in March. The stock hit its 52-week high of $502.49 in September.

How does TSLA stack up for the POWR Ratings?

A for Trade Grade

B for Industry Rank

B for Overall POWR Rating.

It is also ranked #4 out of 29 stocks in the Auto & Vehicle Manufacturers industry.

NIO Ltd. (NIO)

NIO is a Chinese electric car manufacturer which integrates next generation technologies and artificial intelligence for automatic driving EVs. It holds over a 23% market share in China, with projected sales of upwards of 110,000 units in 2020.

NIO recently raised $1.3 billion through an American depository share offering, which is expected to contribute to the research and development of electric car ecosystems and automated technologies, as well as developing its global market presence. It also plans to buy back some of its shares from Hefei Investor Group, which previously bailed out the company with a $1.4 billion cash infusion.

NIO is the first company to launch a ‘battery as a service’ (BaaS) subscription model, allowing customers to purchase electric vehicles and battery packs separately. It is planning to launch its EVs in the European market by 2021. NIO aims to penetrate most important global markets across the world by 2023 – 2024, as announced by CEO William Li. It is currently planning to enter the European car market.

NIO’s vehicle sales and total revenues both increased 146.5% year-over-year to $493.4 million and $526.4 million, respectively, in the second quarter that ended June 2020. Gross profit of $44.3 million indicates significant improvement from loss reported in the prior-year quarter.

NIO’s deliveries for the third quarter that ended September 2020 indicates a 154.3% improvement year-over-year to 12,206 vehicles. In the month of September alone, NIO delivered 4,708 vehicles, representing a 133.2% rise from the year-ago value. NIO’s revenue grew 21.5% from the same period last year.

The consensus EPS estimate indicates 92.4% improvement over the prior-year quarter for the about-to-be-reported quarter. Analysts expect revenues to increase 146.7% year-over-year to $647.5 million.

NIO has gained 593% year-to-date. The stock hit its 52-week high of $29.40 on October 16^th. So it’s no surprise that NIO is rated “Strong Buy” in our POWR Ratings system. It has an “A” for Trade Grade, Buy & Hold Grade, Peer Grade, and Industry Rank. In the 115-stock China group, NIO is ranked #3.

KraneShares Electric Vehicles and Future Mobility Index ETF (KARS)

KARS invests in electric vehicle manufacturing companies around the world. It also invests in companies manufacturing raw materials or parts required in electric vehicles, such as lithium, acid batteries, hydrogen fuel cell, etc. KARS tracks the Solactive Electric Vehicles and Future Mobility Index, and has $32.6 million in assets under management. Its major holdings include Advanced Micro Devices, Inc. (AMD), NVIDIA Corporation (NVDA) and Texas Instruments (TXN).

KARS’ expense ratio of 0.7% is slightly higher than the category average of 0.52%. However, the ETF has generated significant returns this year, which compensates for the relatively higher expense ratio. The ETF has gained 31.6% year-to-date, and 52.4% over the past six months. KARS pays a dividend of $0.44 annually, which yields 1.4% on the current price. Its 4- year average dividend yield is 0.96%.

KARS has gained more than 105% since hitting its 52-week low of $15.40 in March. the ETF hit its 52-week high of $31.85 in October. KARS is rated “Strong Buy” in our POWR Ratings system, in tandem with the growing electric vehicles industry. It has an “A” for Trade Grade and Buy & Hold Grade, and a “B” for Peer Grade and Industry Rank. In the 108-ETF Global Equities ETFs group, KARS is currently ranked #25.

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TSLA shares were trading at $429.44 per share on Thursday morning, up $6.80 (+1.61%). Year-to-date, TSLA has gained 413.28%, versus a 7.98% rise in the benchmark S&P 500 index during the same period.

About the Author: Aditi Ganguly

Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities. More...