Forget Tesla, Buy These 3 Stocks to Profit from the Electric Vehicle Revolution

Forget Tesla, Buy These 3 Stocks to Profit from the Electric Vehicle Revolution

Posted On November 2, 2020 2:26 pm

The electric vehicle market has been one of the hottest investing trends this year. Stocks like Tesla (TSLA) and NIO Inc (NIO) are up 389.8% and 588.1% this year, respectively. But these stocks might not be the best choice for investors looking to get into the electric vehicle market. Both stocks are priced too high as TESLA has a P/E of 788.57 and a Price to Sales Ratio of 15.18, and NIO has a Price to Sales ratio of 24.65. Compared to the S&P 500’s P/E of 34.3 and Price to Sales of 2.5, TSLA and BIO both look ridiculously overvalued.

Due to these high valuations, there has been a surge of new and old companies entering the market. From mainstream automakers such as Ford (F) and General Motors (GM) looking to add more electric vehicles (EV) to their fleet, to a host of new startups, like Workhorse Group (WKHS) and Lordstown Motors. Companies are coming out of the woodwork to get a piece of the pie. Many startups have gone public through Special Purpose Acquisition Companies (SPACs), while others are publicly traded, Chinese manufacturers.

Instead of betting on the cars themselves, I suggest considering stocks that make EV components and materials for batteries as a way to profit off the EV trend. Their stock prices are more reasonably valued, and the companies are just as poised to generate huge revenues from this soaring industry. Here are three companies set to profit from the electric vehicle revolution: Aptiv PLC (APTV), Cree, Inc (CREE), and Analog Devices (ADI).

Aptiv PLC (APTV)

APTV is the dominant player in the manufacture of electric vehicle architecture. It’s Signal and Power Solutions segment supplies components and systems that make up a vehicle’s electrical system backbone, including wiring assemblies and harnesses, connectors, electrical centers, and hybrid electrical systems.

APTV is poised to grow rapidly on the fast-growing electrification, connectivity, and autonomy trends in the automotive sector. One way the company has grown has been through investment in advanced technology as well as collaborations. The company recently entered into a joint venture with Hyundai called Motional to address autonomous driving. The joint venture is looking to have a production-ready autonomous driving platform for robotaxi providers and fleet operators by 2022.

In addition to collaborations, the company has turned to acquisitions to expand its market presence. Last year, its acquisition of gabocom enhanced its cable management portfolio and strengthened its position in the telecommunications market. In 2018, APTV acquired KUM and Winchester Interconnect to strengthen its Signal and Power Solutions segment.

The company is set for strong growth next year as sales are expected to grow 20.4%, and earnings are expected to soar 202.5%. The company’s valuation is also quite attractive with a P/E of 14.4 and an EV/EBITDA of 10.6. The stock is rated a “Strong Buy” in our POWR Ratings system with a grade of “A” in Trade Grade, Buy & Hold Grade, and Peer Grade. It also Holds a grade of “B” for Industry. Those are the four components that make up the POWR Ratings. The stock is ranked #3 in the Auto Parts industry.

Keep a close on APTV tomorrow, as the stock reports its latest quarterly results before the bell.

Cree, Inc (CREE)

CREE is the global leader in silicon carbide technology and supplies approximately 62% of the world’s material. Silicon carbide is a critical factor in driving inverter loss reduction. A cars’ inverters are a vital piece of an EV’s drivetrain and are essential to EV manufacturing. CREE supplies the most important component of the cars’ inverters, power electronics, using silicon carbide technology.

The use of silicon carbide-based power semiconductors will increase the range of electric vehicles and increase efficiency. CREE’s Wolfspeed 650V silicon carbide MOSFETs enable next-gen EV onboard charging, data centers, and other renewable systems with industry-leading power efficiency. The company recently announced it was…

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