The Biden administration is pushing hard to promote electric vehicles (EVs). From a $7.5 billion provision in the ‘Build Back Better’ bill to expand and increase charging station networks to political pressure on automakers to commit to increased production with the goal of converting 40% of car sales to EVs by the end of this decade, it’s clear that under Biden, the government has the will to enforce a major shift in the automotive industry.
For investors, this type of political environment makes the EV sector attractive. Stocks with a link to EVs – especially to vehicle manufacture or charging networks – can be expected to gain on their political value.
Bearing this in mind, we used TipRanks’ database to find two compelling EV stocks, according to Wall Street analysts. Both tickers boast a Moderate or Strong Buy consensus rating, and bring considerable growth prospects to the table.
Let’s start in Europe, where Spanish-based Wallbox is making its mark in both the individual home-based charging niche, and the commercial market. The company aims to create charging systems that are simple, smart, and user centric. Wallbox’s products include the Pulsar home EV charging system, and several business, commercial, and semi-public systems, including the Copper charger with a universal plug and the Commander with a touchscreen for intuitive user interfacing.
Wallbox has been in business since 2015, and has developed a reputation for quality. The company has customers in 80 countries around the world, and in November announced solid revenue growth for Q3 and the year-to-date. Quarterly revenue came in at $22 million, up a robust 250% year-over-year, and making up 40% of the three-quarter total of $55 million. Looking ahead, the company expects to meet its guidance of $79 million in total annual revenue for 2021. Through the end of Q3, the company reported selling over 66,000 charger units.
These results marked Wallbox’s first report as a public company. Like many emerging companies, Wallbox took advantage of the rising market environment this year to engage in SPAC transaction. The charger company merged with Kensington Capital Acquisition Corporation II, in a deal announced back in June. It was approved by the SPAC’s shareholders on September 30, and the WBX ticker entered the New York Stock Exchange on October 4. The merger brought $252 million in gross proceeds to Wallbox and created a combined entity which now boasts a market cap of $2.38 billion.
Baird analyst George Gianarikas took notice – especially of two points that bode well for Wallbox going forward: “Wallbox has ambitiously not only built its own manufacturing capacity but also brought much of the chip design in-house as well its software development. Management maintains these steps have afforded them competitive advantages through product differentiation and ability to rapidly deploy product.”
“We are quite positive not only on the growth prospects of the EV charging market, but also on Wallbox’s ability to continue to grow, operate effectively and manage share in the market (which we assume is ~7% in 2027 from ~2% in 2021),” the analyst added.
To this end, Gianarikas rates WBX an Outperform (i.e. Buy), and his $22 price target implies room for ~49% upside potential in the next 12 months. (To watch Gianarikas’ track record, click here)
Overall, the Strong Buy consensus rating on WBX is unanimous, based on 3 positive analyst reviews set since the ticker started trading. The average price target is $25.33, even more bullish than the Baird view, and suggesting a one-year upside of 71% from the current trading price of $14.80. (See WBX stock forecast on TipRanks)
Rivian Automotive (RIVN)
EVs — based on technology, both in hardware and software — have potential to clear the playing field – and new companies are jumping up to make their mark. They have flexibility that the legacy automakers lack, as they have no need to pour funds and capacity into gas-powered vehicle models, and can focus solely on EVs. Rivian, founded in 2009, is one of those.
The company has developed a ‘skateboard’ platform for electric SUVs and pickup trucks. This uses a simplified chassis with electric drive system built in, and can be modified by installing various battery, seating, body, and even wheel arrangements, to create new vehicles with a relatively high level of parts interchangeability. The company currently has two models under production development, the R1T pickup and the R1S SUV. They use the same platform, and are capable of on- or off-road driving. The company is also developing an electric delivery van in a partnership with Amazon.
Development and production for the large-scale automotive takes money, and Rivian has been raising funds successfully for some time. In January, while still a private firm, Rivian raised $2.65 billion in a funding round, and followed that up in June with a $2.5 billion funding round. Among the backers of these funding rounds were Amazon and Ford Motors.
This past November, in a move to raise more capital, the company held its IPO, putting a whopping 153 million shares on the market. The stock opened for trading at $78 per share, well above the expected $72 to $74 range – and that was well above the initially announced $57 to $62 range. The IPO raised over $12 billion gross proceeds for Rivian, which now has a market cap of $102.19 billion.
Among the bulls is RBC analyst Joseph Spak who takes a bullish stance on RIVN shares.
“We like the segments Rivian is going after and the product looks like a winner. To start, Rivian will focus on the NA market, a region we believe is on the cusp of a BEV inflection. We forecast US BEV mix at ~15% in 2025. Further, ~77% of 2021YTD (Nov.) US light vehicle sales are trucks which is where the Rivian consumer portfolio is focused and in many respects, this segment was left open from a BEV perspective,” Spak opined.
“Rivian’s initial consumer products, the R1T and R1S, are very impressive and category defining. This is critical as to sell vehicles in the intensely competitive automotive industry, it comes down to product and brand,” Spak added.
In line with this outlook, Spak rates RIVN an Outperform (i.e. Buy), and sets a $165 price target, indicating room for ~44% share appreciation through next year. (To watch Spak’s track record, click here)
All in all, RIVN shares have a 10 to 4 split between the Buys and the Holds, giving the stock an analyst consensus rating of Moderate Buy. The shares are priced at $114.66 and their $135 average price target implies a one-year upside potential of ~18%. (See RIVN stock forecast on TipRanks)
To find good ideas for EV stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.
Disclaimer: The opinions expressed in this article are solely those of the featured analysts. 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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