In the market rally after the pandemic driven crash, EV stocks were hot favorites. There were stories with ambitious growth plans like Lucid Group (NASDAQ:LCID) that saw valuations go through the roof. However, as the markets moved from euphoria to fundamentals, several EV stocks plummeted.
Of course, the industry has immense potential through the decade, but investors need to be selective as competition intensifies and several companies struggle with cash burn. This column focuses on three EV stocks to watch in 2024 as they are poised for healthy growth and value creation.
From a long-term growth perspective, it’s expected that there will be 350 million EVs on the road by 2030. This was more than 20 times the amount that were on the road in 2021. Therefore, there is no doubt that the industry will continue to grow at a healthy pace. Investors however need to separate the winners from the laggards.
Let’s talk about three EV stocks to watch as they look attractive considering the growth trajectory.
Li Auto (LI)
Among Chinese EV stocks, Li Auto (NASDAQ:LI) has had an exceptional year. I believe that the Company will continue to perform well in 2024 and is positioned for stellar revenue and cash flow growth.
Talking about growth, Li Auto reported revenue of $4.61 billion for Q3 2023, which was higher by 271.6% on a year-on-year basis. This growth has been driven by the launch of new EVs coupled with an aggressive retail network expansion within China.
It’s also worth noting that for Q3 2023, Li Auto reported a healthy vehicle margin of 21.2%. This has translated into healthy free cash flows and a swelling cash buffer. I believe that strong deliveries and revenue growth will sustain in 2024 for two reasons.
First, Li Auto has a strong pipeline of new cars with mass deliveries of Li MEGA commencing in Q1 2024. The continued retail network expansion will support deliveries growth along with the new launches.
Further, Li Auto reported cash and equivalents of $12.13 billion as of Q3 2023. The company is targeting international expansion and has strong financial flexibility to make aggressive investments in new markets.
Blink Charging (BLNK)
EV charging stocks have remained depressed for a large part of the year. The reasons include cash burn and intense competition. However, it seems that 2024 will be a turnaround year for some of the nest EV charging stocks.
It’s worth noting that Blink Charging (NASDAQ:BLNK) stock has trended higher by 27% in the last five trading days. This might just be the beginning of a major reversal rally from deeply oversold levels.
For Q3 2023, Blink Charging reported stellar revenue growth of 152% on a year-on-year basis to $43.4 million. For the quarter, the company contracted, sold, or deployed 5,956 EV charging stations. With strong presence in the United Sates. and with the introduction of DC fast chargers, I expect the growth momentum to sustain.
However, revenue growth was never a challenge in an underpenetrated market. The key point to note is that Blink Charging expects to achieve EBITDA break-even by December 2024. This is the factor that’s driving BLNK stock higher. As margin continue to improve in the coming quarters, I expect the stock to remain in an uptrend.
Albemarle Corporation (ALB)
For investors bullish on the EV story, lithium is one of the best proxy investments. It’s expected that lithium shortage can come as early as 2025. The metal has corrected sharply in 2023 and I see this as a good buying opportunity. Albemarle Corporation (NYSE:ALB) is the stock to watch among lithium names.
It’s worth noting that ALB stock touched lows of $112 in November. The stock has trended higher by 27% from deeply oversold levels and currently trades at $152. However, ALB stock looks attractive at a forward price-earnings ratio of 6.9 and offers a dividend yield of 1.07%.
An important point to note is that even with lower realized lithium price, Albemarle has guided for revenue growth in the range of 30% to 35%. Even with significant margin compression, Albemarle expects $700 million in operating cash flow. Once lithium trends higher, the Company will be positioned to deliver stellar growth and cash flow numbers.
My view is underscored by the point that Albemarle has guided for expansion in lithium conversion capacity through 2027. Upside in cash flows would also imply healthy dividend growth in the next few years.
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.
