EV stocks are back on Wall Street’s priorities after Tesla (NASDAQ:TSLA) delivered 466,140 vehicles in Q2, beating expectations of 445,924. These numbers indicate that EV company growth is far from over for. Further expansion is only natural since EVs only make up some 1% of the 250 million vehicles on the road in the U.S. This means that the growth story is still in its early stages.
But Tesla is no longer the only EV company in the world. This sector now has many competitors. Most of these incoming competitors are risky due to high cash burn and negligible sales, but the high upside potential is compelling.
In contrast, you can also buy EV stocks that are focused on the charging market. The competition here is somewhat milder, with a better risk-to-reward ratio. Picking the right stocks in all these sectors can lead to tremendous gains as EV sales accelerate.
And so, let’s look at three promising EV stocks that offer compelling entry points for the long term.
ChargePoint (NYSE:CHPT) is one of the leading providers of EV charging solutions, with over 200,000 charging ports worldwide. Even though it’s not directly an EV stock, it will benefit substantially from the increased amount of EVs on the road. This gives the company a 65%-plus market share with a strong network effect. Among the most solid EV-related stocks to buy, it continues trading at a depressed level despite the upside potential.
EV charging demand is expected to grow exponentially as more countries adopt policies to phase out fossil-fuel vehicles and incentivize EV adoption. According to a report by McKinsey, the U.S. goal of 48 million EVs on the road by 2030 would require the charging infrastructure to be 20 times larger than the current size. ChargePoint is well-positioned to capture a large share of this market if it retains the market share it already has. Even if it retains a 30% market share, it is still positioned to generate substantial returns.
As investors rotated out of high-growth names amid rising inflation and interest rates last year, CHPT remains a compelling buy as it lingers sideways. The consensus price target implies a 77.6% upside, thus making ChargePoint a long-term winner in the EV charging space.
Polestar (NASDAQ:PSNY) is the second EV stock that has caught my attention recently. Polestar has two models in production: the Polestar 1, a plug-in hybrid sports car with a limited run of 1,500 units, and the Polestar 2, a battery-electric sedan that competes with Tesla’s Model 3. The company also plans to launch three more models by 2024. Those will be the Polestar 3, an electric SUV; the Polestar Precept, a luxury electric sedan; and the Polestar 4, a convertible electric coupe.
Truly, the delivery numbers set Polestar apart from other startup EV companies. It recently reported that after “strong deliveries in the month of June, up 73% year-on-year, Polestar achieved its best ever second quarter, delivering approximately 15,800 vehicles, a growth of 36% compared to last year. With record global deliveries of around 27,900 for the first six months…”
The future projections don’t look too shabby either, as it targets up to 70,000 deliveries in 2023. Despite this performance, Polestar’s stock has been trading below its SPAC merger price of $10 since its debut. So, investors remain skeptical about its growth prospects and valuation.
However, I think Polestar has the potential to become a leading EV brand in the premium segment. Its stock could reward patient investors in the long run. The consensus analyst price target implies a 22.5% upside; not bad at all.
Aptiv (NYSE:APTV) is also an indirect EV stock, but it’s a safer deal than many other EV businesses due to the combination of value, growth, and a lack of risk. Aptiv is a high-quality EV stock that offers exposure to multiple growth drivers in the automotive industry. I would recommend buying it on any dips.
The company is a global leader in automotive technology, providing solutions for electrical, electronic, and safety systems. In addition, it’s a trend-setter in the fast-growing segments of advanced driver assistance systems (ADAS), active safety, connectivity, and electrification.
Accordingly, the company reported revenue of $4.8 billion in Q1 2023, up 15% year-over-year, and adjusted earnings per share of $0.54, up ~100% YOY. The company also updated its full-year guidance. Yet, Aptiv is trading at an inexpensive valuation of 25 times forward earnings, lower than many of its peers in the EV space.
On the date of publication, Omor Ibne Ehsan 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.