Despite optimism for a Biden infrastructure bill that supports electric vehicles, many automakers have seen their share prices struggle as of late. Traditional automakers including Toyota, GM, and luxury brands like Lamborghini and Porsche have unveiled bold plans to integrate zero-emission vehicles into their lineups.
Whether it's automakers, parts suppliers, basic materials companies, or other businesses, investing in the EV industry can be challenging and confusing. Three stocks that stand out from the crowd are Ford (NYSE:F), Lucid Group (NASDAQ:LCID), and ChargePoint Holdings (NYSE:CHPT). Here's what makes each a great buy now.
The value play
Ford's stock performance embodies how a company can whipsaw from being out of favor, to in favor, to back out again in a heartbeat.
Its storyline has followed a similar path to peers like GM. Both capital intensive businesses have high pension obligations. Increased competition from arguably more efficient companies like Toyota led to years of market underperformance. The shift from petroleum-powered vehicles to EVs was just another headwind weighing down the investment thesis. That is, until Ford dropped an absolute bomb with the release of the electric F-150 Lightning pickup.
At one point in late May, shares were up nearly 70% year to date compared to a 10% loss in Tesla stock. Ford stock has cooled off since then, but the newfound optimism for what has been a heavily underperforming stock for the last decade is encouraging.
According to Ford's July 2021 sales report, Ford F-150 Lightning reservations now exceed 120,000 units. But it's not just the prospects of the Lightning that make Ford a good buy now. Ford EV sales made up around 8% of its July sales, led by the Mustang Mach-E SUV and the F-150 PowerBoost Hybrid. The company is showing it can compete in the electric SUV and truck market.
The automaker has its issues, but its reputation should provide a huge advantage as it looks to take a leading position in the electric truck industry.
The growth play
Lucid Group, commonly referred to as Lucid Motors, has been making waves as it takes aim at Tesla, Daimler's (OTC: DDAI.F) Mercedes-Benz brand, and other market leaders for a slice of the coveted luxury EV market. Despite over 11,000 reservations across the four trim offerings for the company's luxury sedan, the Lucid Air, mass production and delivery remain questionable. The original target date for this milestone was the second half of 2021. Now in mid-September, the clock is ticking for Lucid to make good on its promise.
Since merging with the special purpose acquisition company Churchill Capital IV in late July, Lucid has seen its share price tumble due to production uncertainty. Setting a precedent of barely meeting or flat-out missing deadlines would be a bad start as a public company.
Investors are right to raise a red flag since the company hasn't provided an updated timeline in any of its recent presentations. But praise of Lucid's technology and its ability to hold up in a fiercely competitive space has only increased in recent months.
The company has built an impressive car, but it will need to prove it can achieve scale and support its sedan and other models like the Gravity SUV to deserve its high valuation. Given the potential mixed with a lot of question marks, Lucid is a battleground growth stock that just might fit the profile of a risk-tolerant investor.
The balanced play
Ford and Lucid have exciting EVs aimed at disrupting their respective markets. Even with their advantages, competition should continue to get stiffer as the EV industry matures.
ChargePoint stock offers a way to invest in increased EV adoption in North America and Europe without having to stake your claim in a particular automaker.
The company has a charging network of 118,000 active ports, and was adding over 65 new ports per day in its most recent quarter. It will also integrate around 40,000 new ports in Europe after it completes the acquisition of has·to·be E-mobility, an EV charging company with a leading position in Germany, Austria, and Switzerland.
ChargePoint typically generates over two-thirds of its revenue from its commercial segment, which tends to be businesses looking to offer charging to their employees or customers. ChargePoint doesn't actually make money off the electricity used at its ports. Rather, it makes money from providing the hardware and servicing for those stations through support and subscriptions. For the time being, hardware makes up the majority of revenue (73% in the second quarter of 2022). However, subscriptions to various ChargePoint services are expected to provide a higher percentage of revenue over time. ChargePoint has been expanding its service offerings, which it refers to as its cloud service solutions. In reality, these are basically just added features like power management software, pricing control, valet features, and more that can increase the revenue generated per charging station.
With a market cap of around $7 billion and forecasted fiscal-year 2022 sales of $230 million, ChargePoint has a whopping forward price-to-sales ratio of 30, giving it an extremely lofty valuation for an unprofitable company. But there's reason to believe that it can grow into its valuation over time as EV adoption grows in North America and Europe. ChargePoint could be a growth stock that is worth the risks for investors looking for a catch-all way to invest in EV infrastructure
An attractive trio
Ford, Lucid, and ChargePoint all have their strengths and weaknesses. Buying all three would help mitigate risks while exposing an investor to different aspects of the EV industry. That being said, there's nothing wrong with waiting to see if the Ford Lightning lives up to the hype, if Lucid can get on track with its production rollout, and if ChargePoint can continue to grow at a rate that justifies its valuation.
Simply adding these companies to a watch list and taking a wait-and-see approach could be the best course of action for many investors. But for some, buying equal parts of all three stocks grants skin in the game for an exciting industry that's just getting started.