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When you look at the technology, it’s hard not to be bullish on the future of electric vehicles. The environmental impact alone should be enough to realize that EV adoption will continue to rise as time goes on. As cars move away from being automobiles and more towards computerized vehicles, the benefits of EV technology far outweigh the benefits of traditional internal combustion engines (ICE).
So if you’re bullish on EV technology, one way to play the sector is to invest in battery stocks. Batteries are like the picks and shovels of the industry. Without a fast charge and a long range, it will be difficult to convince most people to consider buying an electric vehicle. While the sector is in a lull, load up on these battery stocks for when EV demand rebounds in the future.
BYD (BYDDY)
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BYD (OTCMKTS:BYDDY) is the leading electric vehicle maker in the Chinese market. Despite being a Chinese company, U.S. investors can buy shares of the American Depository Receipt or ADR on the Over-the-Counter markets. The stock does not receive much coverage from American analysts, but the ones that do have an average price target of $51.30 and a Wall Street high target of $69.00.
The stock was once a preferred investment of Warren Buffet who chose China’s EV market over domestic companies like Tesla (NASDAQ:TSLA). The two companies are head-to-head in global EV sales with BYD narrowly trailing Tesla in the first quarter of 2024. One thing that may surprise you is that Tesla uses BYD batteries for its Model Y, so the two companies are as much partners as they are rivals.
One look at BYD’s valuation and it might be easy to see why Buffett chose BYD over Tesla. BYDDY trades at 16x forward earnings and 0.9x sales. This is compared to 49.7x forward earnings and 5.2x sales for TSLA. With BYD’s five-year revenue CAGR of 36%, this stock has plenty of room to rise in the future.
Albemarle (ALB)
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Albemarle (NYSE:ALB) is an American chemical manufacturer that was founded in 1994 in Charlotte, NC. This stock has a wide range of opinions from analysts on Wall Street as the one-year price target range is as low as $81.00 and as high as $216.00. The average price target of $149.34 implies a 25% upside from its current price.
This company is the world’s largest lithium provider for EV battery production. Albemarle already has standing partnerships with electric vehicle manufacturers. While lithium production continues to rise, prices have dropped off a cliff as demand for EVs has waned in this high-interest rate environment.
Because of the decline in lithium prices, Albemarle and the entire lithium sector have seen stock prices plunge. Shares of ALB are down by nearly 25% since the start of 2024 and are now trading at just 1.3x sales. Wall Street certainly thinks Albemarle’s stock will rise so it is one to target before demand for EVs returns.
Piedmont Lithium (PLL)
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Piedmont Lithium (NASDAQ:PLL) is an American mining company that was founded in 1983. Anyone looking to buy low on lithium will certainly want to add Piedmont to their watchlist. PLL has an average analyst price target of $43.00 with a street-high target of $65.00. Shares of PLL have fallen by more than 80% over the past 52 weeks and are currently trading at just under $12.00.
This lithium company is much smaller than Albemarle but has a lot of similarities. Both are based in the North Carolina area and both have operations overseas in major lithium projects. Piedmont is also a major supplier to Tesla of both lithium and spodumene concentrate SC6 which is a lithium-aluminium pyroxene mineral. SC6 is a critical component for EV batteries as well as smartphones and medications.
As you might have guessed, the significant drawdown in PLL’s price has led to a rock bottom multiple. Shares of PLL are trading at just 5.7x forward earnings and 5.5x sales. Piedmont is another company that will rise and fall with the demand for EVs. While demand is at a near-term low, Piedmont is worth considering before the EV industry rises again.
On the date of publication, Ian Hartana and Vayun Chugh did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
