Electric vehicles have become a rage these days. With the government’s incentives, we will soon see a majority of EVs running on the roads. With a rise in demand for EVs, there will also be a surge in demand for batteries, and smart investors will know where to put their money. It is difficult to figure out which EV will win in the end, but when it comes to batteries, they will always remain in demand as long as there is EV production. The industry might consolidate to a select few players in the long term, but for now, some companies and battery stocks are worth considering.
Automakers are planning to invest $1.2 trillion in the development of batteries and electric vehicles, which means that battery stocks will win. Top EV makers have big goals, and this means a massive surge in battery demand. Now is the right time to sell the stock with low growth potential and buy the battery stocks that look promising.
Battery Stock to Sell: QuantumScape (QS)
QuantumScape (NYSE:QS) is a battery stock to avoid at all costs. It is a very speculative stock but could take forever to pick pace. The company is an early-stage battery maker and has made progress through commercializing technology. When it comes to the solid-state battery, QuantumScape is a leader in commercialization as well as development.
It was in the news recently for the first lithium-metal battery samples.
However, QS stock hasn’t had a good start to 2023. It has been trading at a single digit since Sept 2022. The only time the stock bounced was with the sign of inflation cooling, and it had nothing to do with the company. The company is very ambitious and aims to produce more than 200,000 batteries annually; however, it does not generate any revenue at this stage. That said, the company is also spending heavily on bringing the technology to market and anticipates the capital expenses to range between $175 million to $225 million in 2022.
Its non-GAAP adjusted loss stood at $0.27 in the third quarter, and it is expected that the company will continue a report a loss in the fourth quarter results, which it is scheduled to report on February 15. My InvestorPlace colleague Louis Navellier also believes it is best to hit the brakes on the stock.
The company expects to begin commercial production in 2024 or 2025. However, there are a lot of ‘ifs’ when it comes to the success of QuantumScope, and if the technology fails or the company is unable to meet the production deadline, investors could lose money. If you have already invested in the stock, wait for it to hit double digits and sell it, but if you do not have it in your portfolio, it is best avoided until we see the numbers.
Battery Stock to Buy: Lithium Americas (LAC)
One battery stock to buy this month is Lithium Americas (NYSE:LAC). The company is a resource company that explores lithium deposits, and it has many ongoing projects in the U.S. and Argentina currently. The supply shortage for lithium will lead to huge demand and ultimately benefit the stock. LAC stock is up 37% year to date and is trading at $24 today.
It is already making big moves in the lithium supply industry and owns two high-faulty assets, including the U.S. Thacker Pass mine and the Cauchari-Olaroz in Argentina. Lithium Americas expect an EBITDA of $52 million and $308 million at each mine, respectively. The biggest reason to invest in the company is General Motors’ (NYSE:GM) investment of $650 million for the production of lithium for its batteries.
An automaker as huge as General Motors will only choose the best to work with, and as per LAC, it will produce lithium for one million EVs in a year. With GM investing in a lithium company, other players like Tesla (NASDAQ:TSLA) could also be forced to take similar moves.
B. Riley analyst, Matthew Key has raised the price target of LAC stock to $40 with a Buy rating after the positive ruling for the Thacker Pass Project in Nevada. The Court ruled in favor of the company, which pushed the stock higher. In the third quarter earnings, the company reported a loss of $0.30 per share and a cash balance of $392 million. Despite being unprofitable, LAC has massive potential in the long term, and it is one of the best battery stocks to add to your portfolio today.
Battery Stock to Buy: Nio (NIO)
Once a hot EV stock, Nio (NYSE:NIO) is also known as the Tesla of China. The company has ramped up production and made its presence felt across several countries. However, it did face a tough time due to supply chain issues and Covid restrictions, but the company seems to be faring much better now. Despite the market turmoil, Nio managed to grow production and deliveries. It reported impressive numbers and ended 2022 on a high note.
It is expected that Nio will launch new models this year while also expanding its global presence. The January sales numbers were weak, but the company can manage to bounce back soon as it has done in the past. It is also launching the first battery swap station in Denmark this week, which means we will see movement in the stock.
NIO stock was once trading at a high of $25, but it is trading much lower at $10 today. However, this is an opportunity to grab the stock before it rebounds. The stock is down 50% over the past year, and it might not pick pace immediately, but if the company continues reporting strong delivery numbers, NIO stock could become a hot property again.
My InvestorPlace colleague David Moadel believes NIO stock is worth your consideration. The current drop in the stock is not due to company-related issues but broader macroeconomic concerns. Nio is one of the top battery stocks to own for its massive growth potential, and it could give a tough fight to some of the biggest EV manufacturers in the country.
On the date of publication, Vandita Jadeja did not have (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.