EElectric vehicles (EVs) have become the fastest growing segment of the automotive industry, more than doubling last year to 6.8 million vehicles worldwide. This gives electric vehicles a market share of over 8%, triple what it was in 2019, before the COVID pandemic. The market has found support from political politics, but more importantly, improvements in battery technology and manufacturing that are slowly making electric vehicles more price competitive.
The result is that electric vehicle companies offer investors plenty of opportunities for the future. Automobiles are an essential part of modern life, and electric vehicles represent a high-growth, cutting-edge industry component that is accelerating at the pace of growth.
Against this backdrop, we used the TipRanks platform to dig up the details of two EV stocks that offer investors a triple opportunity: a buy rating from analysts on the street, a triple-digit rise for the year to come and an entry cost below $5 per share. Let’s dive deep and examine each of them with analyst commentary.
We’ll start with Xos, an electric vehicle manufacturer specializing in electric trucks. This is a particularly important niche for electric vehicles, as electric trucks can be optimized for urban delivery routes, staying within a relatively short radius of their base of operation and charging stations. It is a mode of operation well suited to “last mile” delivery and circumvents a major complaint that electric vehicles are not capable of long-range operations. This is the environment Xos has focused on.
Xos debuted in 2016 and is working on the design and manufacture of all-electric medium and heavy-duty commercial vehicles, the drivetrain systems for those vehicles, and the charging infrastructure to support them. The company has a proprietary battery system, dubbed the X-Pack, which fits into a modular, also proprietary, chassis called the X-Platform. The company describes itself as “building an ecosystem of electric trucks for today.”
The company has been publicly listed for less than a year, having entered the public markets, on the NASDAQ index, in August 2021 via a SPAC transaction. The business combo, with the NextGen Acquisition Corporation, brought some $216 million in new capital to Xos. Shares of the company started trading at $9.20 and have fallen 76% since then.
Like many early-stage EV makers, Xos has only recently begun to generate significant revenue. For 1Q22, the company’s revenue reached $7 million, compared to a net loss of $21.2 million. The company saw a significant increase in pre-orders, totaling more than 350 during the quarter, and made large deliveries to big-name customers like UniFirst and FedEx. FedEx deliveries included 15 vehicles to five ground operators in the Southern California region, and Xos now has a total of 550 active orders for this delivery company. Although Xos has lost funds, it still maintains a strong cash position of $129.7 million.
For Northland analyst Donovan Schafer, it all adds up to an electric vehicle company that deserves a second look.
“While the initial forecast in 2020 was very aggressive – calling for a ramp that would hit ~2,000 vehicles in 2022 and ~9,000 vehicles in 2023 – our model’s reduced numbers suggest that stock is attractively priced at these levels. “, Schafer noted.
On another note, and which bodes well for Xos as it strives to ramp up production, Schafer adds, “XOS manufactures its own chassis, which means it doesn’t have some of the constraints of chassis supply faced by its peers. The net result is that XOS just needs access to the sheet metal to bend into the C-beams to make its chassis. This gets around the issue of chip shortages, which has impacted some of the XOS peers.
Overall, this makes XOS stock, according to Schafer, an outperform (i.e. buy) rating, while its price target of $5 implies upside potential of around 133% for the next 12 months. (To see Schafer’s track record, Click here)
XOS shares have 3 recent analyst ratings on record and they are all positive, to support a strong buy consensus rating. The shares are selling for $2.15 and the average price target of $7 suggests an upside of around 226% from that level. (See XOS stock forecast on TipRanks)
Lion Electric Company (VIN)
The next title, Lion Electric, also focuses on the commercial side of the electric vehicle market. Lion offers a line of 7 all-electric school buses and city buses, marketed alongside medium and heavy-duty electric commercial trucks. However, Lion does not stop at vehicles; the company also offers parts and service, charging station infrastructure and purchase financing. Together, this makes the Canadian-based Lion one of the largest electric vehicle companies in the North American market.
In order to differentiate itself from its competitors, Lion offers its products as turnkey solutions for its customers, with packages including driver and technician training. This approach has been particularly successful in the school bus market, where school districts typically manage the maintenance of their own bus fleet.
In early May, Lion released its 1Q22 results and posted strong gains in several important metrics. Chief among them was a massive year-over-year increase in vehicle deliveries, from 24 in the first quarter of 2021 to 84 in the recent report. This 3.5x increase shows that Lion is making progress in increasing its production capabilities. Strong shipments fueled year-over-year revenue growth from $6.2 million to $22.6 million. With the increase in revenue, Lion saw its gross loss decline from $1.8 million in the prior year quarter to $900,000 at the end of 1Q22. Looking ahead, Lion can boast an order book of 2,422 vehicles, worth around $600 million.
Also at the end of the first quarter, Lion released a strong balance sheet. The company had $155.5 million in cash and liquid assets and an available revolving credit facility of up to $200 million. In addition, the company can count on support from the Canadian federal government and the provincial government of Quebec in the amount of 100 million Canadian dollars.
Roth Capital analyst Craig Irwin notes several points that suggest medium to long-term gains for Lion EV, but chief among them is the company’s strong position to benefit from grants and contracts from the US government.
“The $5 billion in funding for EV school bus funding in the infrastructure bill should provide a significant tailwind for market activity in 2H22, and we expect the first vouchers to award be announced as early as October 2022. The 2022 funding disbursement of $500 million opened on Friday the 20th, and will include funding of up to $375,000 per bus, covering as much as the entire cost of a new EV school bus in a special district, or $250,000 per bus for other areas. At a minimum, these federal subsidies should bring costs down to par with conventional diesel buses, while all the benefits of 60 percent reduced maintenance and 80 percent lower fuel costs accrue to buyers,” Irwin explained.
To that end, Irwin is betting on a bullish position in Lion, with a buy rating and price target of $13 that implies 174% upside potential over the next few months. (To see Irwin’s track record, Click here)
So, that’s Roth Capital’s view, now let’s turn our attention to the rest of the street: LEV’s 3 buys and 2 holds merge into a Moderate Buy rating. The mid-price target of $9.50 suggests a one-year gain of about 101% from the current stock price of $4.73. (See LEV stock forecast on TipRanks)
To find great ideas for EV stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a recently launched tool that brings together all of TipRanks’ stock information.
Disclaimer: The opinions expressed in this article are solely those of the analysts featured. The Content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
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