Tesla and GM stock lead this weekend’s watch list of 5 EV stocks near buy points. The group presents investors with an intriguing blend of companies at various stages of maturation with much different strategies for capitalizing on the massive growth opportunity.
Other EV stocks worth a look at this juncture include Ford (F), Lucid Motors (LCID), the startup which came public this summer through the largest-ever SPAC merger, and BYD (BYDDF), the Chinese firm that has been a huge winner for Warren Buffett.
What’s somewhat surprising is that investors seems to be rewarding all of these contrasting EV growth plays, even as the broader stock market and tech stocks in particular have come under pressure over the past month. That’s due partly to recent improvement in the chip shortage that has bedeviled most automakers this year. But it’s also because these companies are in a period of dynamic change, with fast-moving developments that illuminate their long-term prospects.
Tesla (TSLA), of course, is the runaway leader. And while CEO Elon Musk has become famous for delaying much of the innovation he promises, Tesla is also executing. A week ago, Tesla said it delivered a record 241,300 EVs in Q3, up from 201,250 in Q2 and 184,800 in Q1. With production beating estimates, analysts ramped up revenue and profit estimates. That’s why investors have remained patient about Tesla delivering on other growth initiatives, like its Full Self-Driving system, 4860 battery and the Cybertruck.
Tesla stock is still about 13% off its all-time high hit in late January, but it’s been steadily recovering since May. On Sept. 24, Tesla stock cruised past a 765.55 buy point, clearing a handle on the end of a nearly 8-month consolidation. After closing up 1.3% at 785.49, Tesla stock remains within the 5% chase zone that runs through 803.83.
Meanwhile, Tesla also has carved out a 3-weeks-tight pattern, with weekly changes of no more than 1.5%, highlighted by MarketSmith. That offers another buy point at 807.07.
Tesla stock is a member of IBD Leaderboard.
Tesla earnings for the third quarter are due on Oct. 21.
While General Motors (GM) has loads of experience in EVs, in one sense it’s just getting ready to cross the starting line. That’s because GM recently had to recall every Chevy Bolt made since 2016, due to risk that the electric battery would cause a fire. This fall, GM will launch its first EV using its brand-new Ultium battery platform, offering a range up to 450 miles on a charge.
That first vehicle will be the monster Hummer EV, but the Ultium platform is applicable to every vehicle in GM’s lineup. That is allowing GM to develop new vehicles in record time for the company, and if those EVs turn into big sellers, GM will have the scale and efficiency to generate healthy profits. But that’s just the start, as GM detailed at its investor presentation on Wednesday.
Management also laid out a road map to generating as much as $25 billion in annual software and services revenue by 2030. Its Cruise autonomous unit could generate $50 billion in revenue per year, GM says. Meanwhile, its BrightDrop commercial delivery vans, the first of which will be delivered to FedEx (FDX) later this year, could generate $10 billion.
JPMorgan analyst Ryan Brinkman wrote that GM doesn’t have to achieve anywhere near these ambitions to exceed Wall Street expectations. Given how GM stock’s low valuation “clashes” with its high-growth opportunities, Brinkman has a buy rating and 77 price target.
GM stock sold off on the Bolt recall and shelved production amid the chip shortage. But it surged nearly 5% on Thursday, clearing its 200-day line. That break above the key technical level on high volume offered investors an aggressive entry point, with GM stock moving well clear of its downsloping trend line.
But there’s another buy point in sight. GM stock tacked on another 3.8% on Friday to 58.67. During the session, GM stock edged past a 58.70 buy point from a double-bottom base, though it closed just below buy range.
Market Rally, 5 Stocks At Inflection Point; Tesla Delays FSD Beta Rollout
Ford stock rallied with GM stock on Thursday, actually seeing a bigger 5.5% gain on the session. The move lifted Ford stock rose past resistance around 14.75 on high volume, offering an aggressive entry point.
Ford stock then added another 1.5% on Friday to 15.12, climbing to within about 8% of a more traditional cup buy point at 16.55.
On Sept. 27, Ford provided a big update of its EV plans, announcing two new campuses for assembling vehicles and producing batteries in Tennessee and Kentucky. The next-generation EVs are slated for mid-decade, which could put Ford a couple of years behind the competition.
Ford has had a strong reception for its Mustang Mach-E and has seen high interest in its forthcoming F-150 Lightning pickup, due out next spring
Morgan Stanley’s Adam Jonas wrote that Ford is “moving with aggression and urgency to make up for lost time.” Still, he kept an underweight rating on the stock, believing that late start increases the risk of its transition away from internal combustion engine vehicles.
While GM and Ford are investing heavily in building new lithium-ion battery plants, BYD’s biggest selling point is its mastery of lithium iron phosphate, or LFP, batteries. While LFP batteries don’t have the same density, and may not provide the same range, they are safer and cheaper.
Meanwhile, it’s also pushing the envelope of what LFP batteries can do. While Tesla is developing its own advanced battery, Musk had said that the company is likely to use more LFP batteries than lithium-ion batteries.
Buffett’s Berkshire Hathaway has been an investor in the Chinese company since 2008. More recently, BYD has moved from primarily selling batteries and electric buses to becoming a fast-growing EV maker. , BYD sold 36,238 EVs in September, up 140% vs. a year earlier. Including hybrids, it sold 71,099 new energy vehicles, up 258% vs. a year earlier.
It’s also spreading its wings beyond China, now selling cars in Norway. In the past week, it announced a deal to supply 5,000 medium- and heavy-duty battery electric vehicles in the U.S. to Levo Mobility.
BYD stock has been consolidating for the past nine weeks and sits 11% below a 36.01 buy point. There could some earlier entries, but it’s currently sitting just below its 50-day line. Really, it’s been consolidating since January, when BYD hit its all-time high, before losing half its value by mid May. The recent drawdown was much more constructive.
Lucid was founded by Peter Rawlinson, the former Tesla engineer credited for success of the Model S. Now he’s building a luxury EV startup that just launched production of the Lucid Air Dream Edition. It boasts a 520-mile range, the longest certified by the EPA. Lucid Air deliveries are set to start this year.
Lucid’s strategy is to move from extremely high-priced vehicles, around $160,000, down to more earthbound price points. Lucid, which came public in late July, looks like it has staying power. The only question is how long it will take to grow into its already lofty value of about $38 billion.
Lucid stock has etched out a cup-with-handle pattern with a 28.49 buy point. However, the depth of the handle is now 19%, with Lucid stock slipping to 23.23 on Friday. That’s typically deeper than you would want to see a handle. But it’s not surprising to see such volatility given that Lucid is just producing its first car.
Please follow Jed Graham on Twitter @IBD_JGraham for coverage of economic policy and financial markets.
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