These companies are likely to expand within the EV market
- These EV stocks can be massive value creators if investors hold until 2030
- Li Auto (LI): Stellar growth that’s backed by launch of new models and aggressive retail expansion in China
- Rivian (RIVN): Cash burn is a concern, but the growth outlook remains strong in big markets of U.S. and Europe
- XPeng (XPEV): An innovator with aggressive expansion plans for Europe, which is likely to yield positive results
Tesla (NASDAQ:TSLA) initial public offering happened in June 2010. The offer price was $17 per share and TSLA stock closed the first trading day at $23.9.
Adjusted for splits, TSLA stock is higher by 158x from the first day closing price. Indeed, the electric vehicle stock has been a massive value creator.
Even today, it’s among the top EV stocks to buy and hold.
But I must remind investors that Tesla’s journey towards value creation was not smooth. Continued cash burn was a big concern and I remember reading analysts reports writing off TSLA stock as a destroyer of value. Coming to the present, I believe that there can be multiple EV stocks that can try and replicate the performance of Tesla.
My view is underscored by the fact that the EV industry is still at an early stage of adoption. If things continue to move in the right direction, there is ample scope for growth for promising EV companies in the next 10 to 15 years.
This column discusses three EV stocks that can be the next Tesla in terms of growth and shareholder value creation.
Li Auto (LI)
Li Auto (NASDAQ:LI) has emerged as one of the most promising EV stocks from China. Year-to-date, LI stock has surged by 60% and the rally has been backed by strong business developments. The recent correction from highs is a good opportunity to accumulate. In my view, LI stock is worth holding until 2030 for multibag returns.
An important point to note is that even with challenging macroeconomic conditions, Li Auto has reported stellar growth.
For Q3 2023, deliveries surged by 296.3% on a year-on-year basis. This growth has been due to the launch of new models coupled with an aggressive retail expansion within China. Of course, the growth trajectory also clearly indicates that the EVs have been well accepted by consumers.
I like the fact that Li Auto continues to focus on China. Even with $10.17 billion in cash buffer, the company has stayed away from global expansion, which might result in cost escalations. Further, macroeconomic conditions are not the best to invest in new markets.
With LI MEGA due for launch in December, it’s likely that growth in China will remain well above the industry average.
Rivian Automotive (RIVN)
Rivian Automotive (NASDAQ:RIVN) stock trades higher by 14% YTD. However, the small rally comes after a deep correction.
Investors continue to remain cautious on RIVN stock due to concerns about cash burn and dilution. However, even Tesla had to navigate an extended period of cash burn. I am bullish on Rivian from a long-term perspective.
Currently, Rivian has three models that include RS1, RT1, and the electric delivery van. Further, R2-based vehicles are due for production in 2026. For the current year, Rivian has guided for production of 52,000 vehicles. An important point to note is that Rivian ended Q2 2023 with a total liquidity buffer of $11.3 billion.
Recently, the company announced fund raising of $1.5 billion through convertible notes. Funding growth does not seem like a concern. However, if EBITDA losses narrow in the next 12 to 24 months, RIVN stock can rally significantly from oversold levels.
It’s worth noting that Rivian already has an operational base in Europe. To expand in this market, the company is looking at the smaller and affordable R2-based vehicles. With a big addressable market, the outlook is positive.
XPeng (XPEV)
XPeng (NYSE:XPEV) is another interesting name among EV stocks that can potentially be the next Tesla. It’s been a good year for XPEV investors with returns of 50% YTD. With ambitious expansion plans, XPeng looks attractive even after the recent rally.
For Q3 2023, XPeng reported vehicle deliveries of 40,008 units, which was higher by 72% on a quarter-on-quarter basis.
It’s worth noting that at towards the end of September, XPeng commenced delivery of its G9 in Norway, Sweden, the Netherlands, and Denmark. The aggressive push for expansion in Europe is likely to yield results in the coming years.
It’s also worth mentioning that XPeng reported cash and equivalents of $4.65 billion as of Q2 2023. The strong cash buffer provides flexibility to invest in product development and European expansion.
On the flip-side, vehicle margin was depressed in Q2 2023. A potential expansion in vehicle margin in the coming quarters can translate into meaningful upside for XPEV stock. Overall, backed by innovation, XPeng is positioned to survive and growth in the coming years.
This post originally appeared at InvestorPlace.
On the date of publication, Faisal Humayun 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.
