EV stocks have multiplied in Tesla‘s (TSLA) wake and as electric cars look to go mainstream — but not all are created equal. Some car stocks are more ready than others for an electric future. Here are the top-rated EV makers and EV-related plays.
- Li Auto
- ON Semiconductor
- Aehr Test Systems
- Allegro MicroSystems
Best EV Stocks To Buy Or Watch
The charts of most EV stocks remain under strain. Broadly, both established automakers and startups are a speculative bet on the growth of electric vehicles, itself seen as a nascent field. Growth stocks have been hurt by worries about inflation and recession.
It’s hard to find an EV stock with a good mix of fundamentals and technicals right now. These are our picks based on EV sales, strategy and growth plans.
Tesla has an IBD Composite Rating of 98 and an EPS Rating of 94. TSLA stock earns an RS Rating of 95, meaning that it has outperformed 95% of all stocks in IBD’s database over the past year. Tesla stock tumbled despite strong earnings on July 20, but remains above key technical levels.
In Q2, Tesla achieved record EV sales on the back of price cuts. The global EV leader makes four models, primarily the Model 3 sedan and the Model Y crossover SUV. Its long-awaited Cybertruck is due later this year. It also plans the Semi and Roadster, for which launch dates have been pushed back.
Tesla expects to grow deliveries 50% annually. In 2022, its vehicle sales jumped 40%, year over year, to 1.31 million. Production increased 47% to 1.37 million.
In 2022, BYD (for Build Your Dream) sold more than 1.85 million electric cars, including hybrids. It also switched last year to producing only electric vehicles.
The China auto giant is targeting three million vehicle sales this year, with hopes for 3.6 million, nearly doubling vs. 2022. BYD also scored record Q2 sales and has signaled soaring profits.
BYD, which is backed by Warren Buffett’s Berkshire Hathaway (BRKB), has brought out several new and refreshed models. Most of its sales are on home turf, but a big international expansion is underway.
The company makes its own batteries and chips, which has driven its rapid growth.
Li Auto Stock
China EV startup Li Auto (LI) carries a Composite Rating of 99, EPS Rating of 84 and RS Rating of 96.
After a strong 2022, Li Auto continues to outsell rival startups Nio and XPeng.
LI caters to the market for premium electric SUVs. The company specializes in “extended range” EVs, which use a small gasoline engine to increase driving range.
Its new L7 SUV is off to a strong start. Li’s first all-electric vehicle is due by end of year.
Unlike many EV startups, Li Auto is profitable, though inconsistently so.
ON Semiconductor Stock
ON Semiconductor (ON) holds a Composite Rating of 90, EPS Rating of 85 and RS Rating of 94.
Also known as Onsemi, ON Semiconductor sees big opportunity in electric vehicles.
Its silicon carbide, or SiC, chips can operate at much higher voltages, temperatures and frequencies than traditional silicon-based semiconductors. That makes them a better choice for EVs.
Silicon carbide semiconductors are Onsemi’s fastest-growing product line. The company sees sales of SiC chips growing at a compound annual rate of 70% through 2027. It expects to grab 35%-40% of the SiC market by 2027, up from 14% now.
Aehr Test Systems (AEHR) carries a Composite Rating of 97, EPS Rating of 47 and RS Rating of 99. Aehr stock spiked 17% on an earnings beat July 14.
Aehr, a semiconductor equipment maker, offers products for testing logic, optical and memory integrated circuits. The need for semiconductor quality and reliability is on the rise. As a result, the Fremont, Calif.-based company is growing revenue by double digits.
Aehr touts strong demand for gear to test silicon carbide power chips used in electric vehicles.
Besides electric vehicles, silicon carbide chips are used in 5G wireless, aerospace, solar and wind energy, and other markets.
Allegro MicroSystems (ALGM) holds a Composite Rating of 99, EPS Rating of 99 and RS Rating of 97.
The fast-growing Manchester, N.H.-based company makes magnetic sensing and power management chips. Last year, 69% of its sales came from the automotive market.
Allegro has seen its chip content in automobiles grow as vehicles become electrified and offer more advanced safety features.
“Our content opportunity on EVs is twice that on internal combustion engine-driven vehicles, approaching $100 a vehicle,” Chief Executive Vineet Nargolwala has said.
That is helping to drive strong earnings and sales growth.
Tesla Vs. BYD: Which EV Giant Is The Better Buy?
Are EV Stocks A Good Buy?
Companies with two characteristics generally make the best candidates for stocks to buy and watch, according to CAN SLIM guidelines. First, they need a strong track record of earnings growth. Second, they should be technically strong and be shaping bullish chart patterns.
Most of the new EV startups have neither. Those EV stocks include Fisker (FSR), Canoo (GOEV), Faraday Future (FFIE), Lordstown (RIDE) and Xos (XOS). In fact, many of the startups aren’t producing electric vehicles yet.
Get Alerts To Stocks Near Buy Points With IBD Leaderboard
EV Battery Stocks, EV Charging Stocks
The growing universe of EV stocks doesn’t end with carmakers. A constellation of other companies provide car batteries, car charging stations, electric motors and other EV-related products. Among them are ChargePoint (CHPT), EVgo (EVGO), Blink Charging (BLNK) and Wallbox (WBX).
Magna (MGA) supplies battery enclosures and e-drive gearboxes. It’s also an EV contract manufacturer.
Find Aparna Narayanan on Twitter at @IBD_Aparna.
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