Electric vehicles (EVs) are quickly becoming a key part of automakers' lineups, and a recent survey by KPMG showed that auto executives believe EVs will account for up to 40% of their new-vehicle sales by 2030.
And while the EV market is poised to continue growing over the coming years, not all companies in the sector will benefit equally.
Investors might want to consider buying Ford (F 3.63%), while being very cautious before jumping in with ChargePoint Holdings (CHPT 9.54%).
Image source: Getty Images.
Why Ford is an EV stock to buy
Sometimes legacy automakers get overlooked in conversations about EV stocks, but investors shouldn't make that mistake with Ford.
The company already had three successful EV models: the F-150 Lightning, Mustang Mach-E, and its E-Transit van. And it has big plans for a broader EV future.
The company broke ground in the third quarter on what it calls BlueOval City, a new EV factory campus in Tennessee that will come on line in 2025. It is spending $5.6 billion on the project, which will be used to build an all-new electric truck and to manufacture batteries for its Ford and Lincoln brands.
The main goal for the campus is to help Ford reach an annual EV production run rate of 2 million by the end of 2026.
NYSE: F
Key Data Points
It's worth mentioning that even amid some headwinds in the EV market -- including inflation and rising material costs -- Ford says it's still on track to have an annual EV production rate of 600,000 by the end of this year and is adding manufacturing shifts to build each of its current EV models.
CEO Jim Farley pointed out on the latest earnings call that the company is already the No. 2 electric brand in the U.S., and it's just beginning to scale its production.
And with Ford's shares trading at a price-to-earnings (P/E) ratio of just 5.7 -- compared to EV leader Tesla's 37 P/E -- the automaker's stock is a relative deal compared to one of its most important competitors.
Why investors should avoid ChargePoint right now
ChargePoint offers investors a piece of the EV infrastructure pie by making hardware and software for EV charging stations.
The world is going to need a lot of charging stations soon, and ChargePoint is already off to a pretty good start with 211,000 charging ports across the U.S. and Europe.
It also recently signed a partnership with Mercedes-Benz Group (MBGA.F 2.58%) to help build a large network in the U.S. that will add 400 fast-charging stations.
But there are also some serious red flags for ChargePoint right now.
NYSE: CHPT
Key Data Points
Most importantly, the company is unprofitable. In the most recent quarter, it lost $84.5 million, after a loss of $69.4 million in the year-ago quarter. The widening loss came even though the company nearly doubled sales over that period to $125.3 million.
The company says that supply chain issues and increased costs are weighing down its gross margin, causing the widening losses. Gross margin was 18% in the most recent quarter, down from 25% in the year-ago quarter.
Lots of high-growth companies are unprofitable, but this becomes a bigger problem in the current U.S. economy. High interest rates are making it more expensive for companies to borrow, and when combined with ChargePoint's increased costs, that could slow the progress toward profitability.
Until ChargePoint shows that it can grow its revenue and get its rising losses under control, investors might want to think twice about buying the stock.
A quick reminder about EV stocks
It's worth mentioning that all EV stocks are volatile right now, and investors will likely need to be patient while they recover. But with the shift to electric vehicles already well underway, completely ignoring this industry could be a big mistake.
