The auto industry’s journey toward an all-electric future faced significant challenges in 2023. Many of these challenges have persisted, forcing Wall Street analysts to revisit their previously bullish stance on the EV market. This piece identified three EV stocks with glowing ratings as investors prepare for a potential recovery.
Earlier EV ambitions, driven by a projected $1.2 trillion investment by 2030, have led key players like Tesla (NASDAQ:TSLA) and Rivian to reassess strategies and investments.
Tesla, a market leader, has responded to waning demand with substantial price reductions, a tactic to sustain consumer interest. Deutsche Bank’s (NYSE:DB) Emmanuel Rosner said the EV market encountered a “meltdown” in investor expectations and the automakers’ commitment.
“Companies have planned massive investment on the premise of much faster adoption of EVs; this is not playing out,” Rosner told CNBC. “It’s a real meltdown of expectations, which has resulted in a meltdown of stock prices.”
This slowdown stems from a disconnect; early adopters shrugged off high prices and limited infrastructure, while the broader market hesitated due to these issues.
As such, the path to mass EV adoption faces obstacles such as infrastructure inadequacies and higher pricing compared to gasoline vehicles, with expectations that Tesla might not offer a mass-market affordable EV until around 2025.
Despite EV adoption challenges, demand in China, Europe, and the U.S. outpaces the total vehicle demand. Global EV production is projected to triple by 2030, reaching 33.4 million units, nearly a third of all vehicle production.
Let’s take a look at three EV stocks with glowing ratings.
Li Auto (LI)
Li Auto (NYSE:LI) is a prominent Chinese EV manufacturer. The company is best known for its range-extended electric vehicles, which combine a traditional gasoline engine with electric propulsion. The company’s flagship model, the Li ONE SUV, has enjoyed success as it boasts advanced technology and luxurious features.
Last week, LI stock soared after the data showed the company had seen strong traction in its electric vehicle EV sales in China, surpassing Huawei-backed Seres. This surge in sales places the company just behind BYD (OTCMKTS:BYDDY) and Tesla in the weekly sales ranking, widely regarded as an industry benchmark based on insurance sales data.
Li Auto sold 9,300 units during this period, outperforming Seres, which had previously led in sales for two months, with 8,500 units sold. The recent surge in Li Auto’s shares occurs amid an intensifying price war among EV manufacturers in China, as companies strive to attract consumers in the face of declining demand in the world’s biggest auto market.
Another reason to stay positive on Li Auto shares is the information that the company is expanding its product lineup with the announcement of new versions for its 2024 models – the Li L7 and L8. LI shares are down 11.4% since the start of this year. Still, Li Auto stock is the best-rated EV stock at the moment, according to StreetInsider’s rating system.
Rivian (RIVN)
Rivian Automotive (NASDAQ:RIVN) is a major American EV and one of the 3 EV stocks with glowing ratings player that has gained prominence for its innovative electric trucks and SUVs. The company’s key products include the R1T, an all-electric pickup truck known for its robust performance and off-road capabilities.
The company’s stock rebounded recently after Rivian decided to halt its plans for a new multi-billion-dollar factory in Georgia, focusing instead on cost-cutting measures as it gears up to launch a more affordable electric vehicle.
According to a recent filing, this pivot is expected to save the company over $2.25 billion in capital expenditures. Rivian said it now intends to shift the production of its upcoming R2 model to its existing Illinois facility, aiming for delivery commencement in the first half of 2026, sooner than initially planned.
Rivian was forced to make such a pivot amid concerns about the company’s financial health and product demand. The company had secured a record $1.5 billion incentive package from Georgia for the factory, promising to create 7,500 jobs by 2028. This way, Rivian has positioned itself to sustain the ongoing financial challenges and soft EV demand.
Despite surpassing revenue forecasts with $1.32 billion in Q4, the company’s forecast of producing only 57,000 vehicles—well below the expected 80,000—and its decision to cut 10% of its salaried staff due to economic hurdles led to a significant drop in its stock price.
Still, Rivian stock remains 51% down year-to-date.
Nio (NIO)
Nio (NYSE:NIO) is a pioneering Chinese electric vehicle manufacturer with flagship products like the ES8, a luxury electric SUV; the ES6, a high-performance electric SUV; and the EC6, a stylish electric coupe SUV.
Shares recently took a hit after J.P. Morgan (NYSE:JPM) downgraded the stock and significantly cut its price target, reflecting growing concerns over the EV maker’s sales momentum amidst a competitive market.
JPMorgan’s move comes in the wake of slow sales in January and heightened investor worries regarding the company’s performance prospects for 2024. The company’s stock is down nearly 40% year-to-date.
Nio also reported a decline in its electric vehicle deliveries for February, with 8,132 EVs delivered. This figure represents a 19.1% decrease from the 10,055 vehicles delivered in January and a more significant 33.1% drop from the 12,157 vehicles delivered in February of the previous year.
While fundamentals haven’t improved recently, Nio stock valuation remains extremely attractive, offering a long-term buying opportunity for investors willing to adopt a patient approach.
On the date of publication, Shane Neagle 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.