Some investors are scratching their heads wondering why certain EV stocks haven’t met their earnings and total return expectations, but there are new companies to keep an eye on that are just getting started. Often it can be hard to measure how quickly an industry is growing from today’s point of view, with its true potential and momentum only fully revealed in hindsight. For investors determined to ride the clean energy trend, here are some potentially undervalued EV stocks to consider adding to your portfolio.
BYD Company (BYDDF)
Warren Buffett backs BYD Company (OTCMKTS:BYDDF), a manufacturing company that holds a prominent position in the fast-growing Chinese EV market. Despite a recent drop in price, BYD is seen as a substantial player in the EV space, and there is an excellent reason why.
While Tesla’s sales stumbled, BYD’s sales surged, putting it on track to potentially overtake Tesla in all-battery electric vehicle (BEV) sales. Tesla faces challenges with reduced profit margins despite its efforts to revitalize its lineup with price cuts and introducing the updated Model 3 and the much-anticipated Cybertruck. BYD, on the other hand, is not just closing the gap in sales but also outperforming Tesla in terms of financial health, boasting higher gross margins and robust sales growth.
It remains to be seen whether BYD will take Tesla’s crown as one of the best EV companies. But at just 22x earnings compared with Tesla’s 69x earnings, that potential is certainly there.
Nio (NIO)
Another major Chinese EV manufacturer, Nio (NYSE:NIO) is a pure EV play that has seen significant interest due to its exclusive focus on electric vehicles.
Once facing bankruptcy, NIO struggled in the stock market since its peak in February 2021, with shares declining significantly into 2023. With the EV industry expected to stabilize by 2025 and NIO’s low price-to-sales ratio compared to peers, some analysts predict the stock could more than double in the same year.
NIO also plans to reduce its staff numbers by 10% as it faces headwinds, including greater competition in the EV market. Good companies that trim their staff numbers tend to rebound strongly in subsequent quarters. Smaller companies have lower overhead, are easier to manage and can focus on efficient operations to better deliver objectives.
But NIO certainly has risks, cratering 123.02% year-over-year (YOY) and revenue down 14.77% over the same period. Still, its valuation may warrant a small position, making it a good current EV stock to buy currently.
Lucid Group (LCID)
An American EV maker that targets the higher-end market, Lucid Group (NASDAQ:LCID) is likened to an early-stage Tesla. With a focus on luxury EVs, Lucid may offer substantial growth potential relative to other established players in the industry.
LCID stock is another high-risk, high-reward play. It reported disappointing third-quarter results, with a significant drop in revenue. It also lowered annual production guidance to 8,000-8,500 vehicles, down from the 10,000 target. Despite this, Lucid maintains a strong liquidity position of $5.45 billion, sufficient to sustain the company until at least 2025.
The company has also started production on new models and announced the upcoming unveiling of its SUV, Gravity. Efforts to improve cost control and expand production capabilities, including a new factory in Saudi Arabia and a strategic agreement with Aston Martin (OTCMKTS:AMGDF), are underway.
Due to these factors, LCID stock trades at just 11x, making it one of the cheapest EV stocks to buy using this metric. Although it faces significant challenges, investors with high-risk tolerance may find value in LCID due to its low multiples.
On the date of publication, Matthew Farley did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Matthew started writing coverage of the financial markets during the crypto boom of 2017 and was also a team member of several fintech startups. He then started writing about Australian and U.S. equities for various publications. His work has appeared in MarketBeat, FXStreet, Cryptoslate, Seeking Alpha, and the New Scientist magazine, among others.