Invest in the future with key EV battery stocks as China leads the lithium charge
During 2024, commodities have outperformed equities by a slight margin. Case in point, the WisdomTree Enhanced Commodity Strategy Fund (NYSE:GCC) is up 12.7%. And Vanguard Total Stock Market ETF (NYSE:VTI) is up 11.6% year-to-date (YTD). However, not all exposures to commodities are equal. The EV battery stocks market is a proxy for hard commodities, relying on the forecasted growth of EV sales.
For example, the U.S. Energy Information Administration (EIA) noted that EV sales in Q1 2024 surpassed Q1 of 2023 sales by 25%.
Even with accelerated growth of hybrid plug-in cars over pure electric vehicles (EVs), the battery demand is poised to outpace the supply. And the key markets are in the U.S., E.U. and China. Electric car affordability remains the main hurdle in mass adoption. Yet, multiple EV companies are set to introduce cheaper models in 2025 and beyond.
Similar to uranium stocks, this places EV battery stocks on an upward trajectory. Battery manufacturing will scale up to become cheaper over time. So, this will only boost the case for increased sales of more affordable EVs.
But which EV battery stocks have the highest gains potential?
Enovix Corp. (ENVX)
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In May, Enovix Corp. (NASDAQ:ENVX) began the process of customer sampling of its cutting edge EX-1M battery. Spanning from the use in mobile devices to EVs, the company develops battery technology using a 3D-arrayed silicone anode approach. This offers higher density in smaller packages.
More importantly, this tech is lithium-ion compatible, i.e., material-agnostic. This way, Enovix Corp. partners don’t have to design new battery management systems, boosting the company’s bottom line. Enovix Corp. has a pilot-production facility in Fremont, alongside its high-volume manufacturing plant in Manila, Philippines.
The $1.2 billion plant in Penang, Malaysia, dubbed Fab2, is yet to go online this year. In other words, Enovix Corp. is an exposure to new battery tech yet to go full steam. This is apparent from the company’s low revenue figures in Q1 of 2024, down to $5.3 million from the $7.4 million in the year-ago quarter.
Nonetheless, Enovix Corp. has plenty of runway to materialize its potential, having left Q1 with $264.5 million in cash and cash equivalents. From the present price of $13.64, ENVX stock is up from its 52-week low of $5.70 per share. Nasdaq’s forecasting puts ENVX average price target at $31.38, accounting for the scaling of operations and the company’s promising battery tech.
Lithium Americas (Argentina) Corp. (LAAC)
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Having won the presidency in Argentina, Javier Milei boosted the case for Lithium Americas (Argentina) (NASDAQ:LAAC). On multiple occasions, he signaled alignment with the U.S. rather than China. This is a big deal, considering China’s 75% share in global battery manufacturing capacity in 2022.
The China-U.S. tensions translate to staking a hold on lithium commodities as the demand for EVs ramps up. After the split from parent company Lithium Americas (NASDAQ:LAC), the Argentinian offshoot focused on northern Argentina. This region is commonly referred to as the “Lithium Triangle” that holds an estimated 70% of global lithium reserves, shared with Bolivia and Chile.
The parent company (LAC) holds Thacker Pass in Nevada and is expected to churn 40,000 tonnes of LCE (lithium carbonate equivalent) in phase 1. And, LAAC holds two lithium brine sites in Pastos Grandes and Caucharí-Olaroz.
In May’s Q1 earnings report, Lithium Argentina produced ~4,500 tonnes of LCE, inching towards a 20,000 – 25,000 production target for 2024.
Compared to LAC’s $147 million in cash and cash equivalents in Q1 against $7.9 million long-term liabilities, LAAC left the quarter with $86 million in cash against $226 million total liabilities. From the present price of $4.11, LAAC is near its 52-week low level of $3.84 per share. Nasdaq’s forecast data puts the average LAAC price target at $7 per share.
Microvast Holdings (MVST)
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Another penny EV battery stock, Microvast Holdings (NASDAQ:MVST) materialized its growth after merging with Tuscan Holdings SPAC in 2021, combining $3 billion worth of value.
Having control of its entire battery supply chain, Microvast Holdings is a vertically integrated EV battery stock, from materials to individual battery cells. Combined with its many patented battery technologies and three plants in operation, it makes for a solid exposure to growth EV battery stocks.
In May’s Q1 earnings call, the company reported record revenue of $81.4 million, which is a 73.2% year-over-year (YOY) uptick. Microvast Holding’s successful scaling of operations manifested as 10.9% gross margin improvement from the year-ago quarter.
While still having a $24.8 million net loss, it is an improvement over $29.6 million net loss in Q1 2023. This trend will have to ramp up considering Microvast’s rapid depletion of cash reserves, going from $260.4 million to $86.7 million in the same period. However, analysts believe MVST stock will revisit its 52-week high point of $2.91 compared to its current price level of 46 cents per share.
Their average MVST price target is $3 per share, making Microvast one of the highest potential EV battery stock gainers.
On the date of publication, Shane Neagle 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.
