Electric vehicle (EV) stocks are in a tizzy, communicated by Tesla’s (NASDAQ:TSLA) more than 40% year-to-date slump. If that doesn’t provide enough evidence, consider the Global X Autonomous & Electric Vehicles ETF‘s (NASDAQ:DRIV) near 10% year-to-date drawdown.
Although recent results show that EV stocks are under pressure, key metrics indicate numerous EV stocks are oversold. For example, a forecasted annual growth rate of 17.8% until 2030 suggests the industry maintains a robust fundamental outlook. Moreover, DRIV ETF has a relative strength index of around 32, implying that market participants have overreacted.
My outlook on EV stocks is merely one among many. As such, it is up to you to decide whether your outlook aligns with mine. However, if you share my positivity, here are three EV stocks to consider.
BYD Company Limited (BYDDF)
BYD Company Limited (OTCMKTS:BYDDF) stock has lost nearly 10% of its value since the turn of the year, driven by systematic features like a broad-based drawdown in EV stocks and inconsistent consumer patterns.
Although industry-based wobbles have occurred, BYD Company’s fundamentals remain robust. For example, BYD Company’s first-quarter sales climbed to 624,000, a 14% year-to-date increase. Moreover, BYD released its full-year results in March, revealing an 80% surge in its net profit margin to RMB30.04 billion (approximately $2.77 billion).
I believe the key to BYD Company’s success is due to its successful product development paired with margin expansion initiatives. In fact, the latter is emphasized by BYD Company’s return on common equity ratio (ROE) of 24.02%, exceeding its five-year average by 1.67x. Additionally, BYD Company’s market share grew to 22% in 2023, suggesting it has economies of scale at its disposal, allowing it to enhance its footprint in the coming years.
I’m sure the above-mentioned data points illustrate BYD Company’s fundamental resilience. However, the question beckons: Is BYD stock undervalued? Well, BYD’s forward price-to-sales ratio of 0.72x illustrates top-line value. In addition, BYD stock sports a price-to-earnings-growth ratio of 0.22x, suggesting its earnings-per-share growth is blemish-free.
So, to answer the question, Yes, BYD stock is grossly undervalued and likely to recover!
Li Auto (LI)
Li Auto (NASDAQ:LI) is a contrarian play in many ways. The company’s stock price is down by more than 30% year-to-date due to lower sales volumes and systemic financial market pressure. However, key metrics suggest LI stock is set to recover; here’s why.
Much of Li Auto’s latest problems derive from lower delivery volumes. Although Li Auto’s March deliveries of 28,984 represent a year-to-date high, the line item remains below its ten-month high of 50,353. However, Li Auto’s demand-side factors are set to improve as the company has embarked on model-wide price cuts.
Some market participants are worried about Li Auto’s price cuts, but I’m not. I mean, why should I be? Li Auto has an ROE of 22.29% and a net income margin of 9.45% (1.08x higher than the sector median). These metrics allow Li Auto to use price cuts to stimulate demand and enhance shareholder value.
Lastly, Li Auto’s stock looks good from a capital markets perspective. For instance, Li Auto’s forward price-to-sales ratio of 0.91x suggests it is grossly undervalued. Additionally, Li Auto’s enterprise value-to-sales ratio of 0.70x is at a sectoral discount worth 43.21%, conveying relative value.
Lucid Group (LCID)
Lucid Group (NASDAQ:LCID) has tanked since the start of the trading year, losing more than 40% of its market value. The asset’s poor performance has dragged LCID stock’s relative strength index down to about 31, communicating a potential buy-the-dip opportunity; let’s delve into Lucid’s key variables to find out if it is oversold.
I picked up a few salient points that could influence Lucid. Firstly, JPMorgan (NYSE:JPM) recently declared Lucid stock a top-ten Put option writing idea. Although option premiums were the main talking point, selling put options generally requires a bullish outlook on the underlying stock price, which is why I consider this a positive indicator.
Furthermore, Lucid revealed additional details about its 2024 Lucid Air Grand Touring model last Wednesday. The firm’s management communicated encouraging features, such as an estimated range of 516 miles and enhanced DC charging times. Sure, market-based variables forced Lucid Group’s model pricing down to $109,900 from its initial $125,600. However, most pricing headwinds are industry-driven rather than structural issues pertaining to Lucid.
While Lucid may be perceived as a risky investment due to its current loss, Lucid’s price-to-sales ratio of 8.32x is at a cyclical discount of nearly 98%, suggesting relative value is in store. Moreover, I anticipate that solid product execution and long-term cost-cutting initiatives will drive LCID stock into net undervalued territory.
I think LCID is oversold and underappreciated!
On the date of publication, Steve Booyens did not hold (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.