HomeMarket NewsThe Electric Charge: Revving Up 3 EV Stocks Set to Surge

The Electric Charge: Revving Up 3 EV Stocks Set to Surge

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In the realm of stocks, electric vehicle (EV) companies have been akin to a beat-up jalopy limping along a crowded highway for the past two years. Despite the endurance of a few EV firms that have managed to stay in the race, the broader EV sector has struggled to keep pace with the roaring engine of the overall market.

Why the drag, you might ask? The culprit, my dear readers, lies in the merciless grip of staggeringly high interest rates that have throttled the entire EV industry. With borrowing costs soaring into the stratosphere, consumers have become reluctant to take the financial leap into big-ticket items like electric cars. This adverse macroeconomic climate has stymied EV sales, consequently anchoring down EV stocks.

Shift in Tide: A Summer Rebound on the Horizon

Despite the bumpy ride thus far, I dare say the wind is about to shift in favor of electric vehicle stocks as we coast into the summer months. The Federal Reserve’s interest rate-tightening marathon seems to be nearing its finish line. Therefore, once the rates start their descent, EV sales are bound to rev up. Consumers will regain their confidence to make the purchase as financing costs dip. Moreover, the EV segment still has vast untapped potential – with only a paltry 1% of vehicles on the roads today being electric. This leaves a gaping expanse for growth in this arena.

With the landscape improving, now marks a serendipitous epoch to strategically position oneself in high-quality EV stocks before they bolt ahead. Allow me to introduce you to three electrifying prospects waiting to zoom ahead.

Charging Ahead: Tesla (TSLA)

Tesla (TSLA) badge on steering wheel of car

Source: Christopher Lyzcen / Shutterstock.com

Behind the wheel, we find Tesla (NASDAQ:TSLA), one of the prominent figures in the electric vehicle spectacle. Lately, the company’s stock has been skidding downhill, down nearly 58% from its summit. It seems Mr. Market, in its frenzy, has veered too much into pessimism and hit the brakes a tad harder than necessary. Analyzing the road ahead, I maintain an optimistic outlook on this pioneering company, considering the current slump as a promising long-term investment turn.

The headwinds of high interest rates have undoubtedly dented the demand and weighed down the stock. Tesla might continue to feel the rough terrain ahead until the Federal Reserve eases off the pedal and cuts the rates. Yet, projecting over the next 5-10 years, my faith in Tesla’s potential remains unwavering. While challengers like BYD (OTCMKTS:BYDDF) are in the rearview mirror, the Chinese automaker’s lack of Tesla’s brand sway hints at a struggle to grab a piece of the American or European pie. Tesla stands alone as the lone profitable, mass-market EV creator in the Western realm.

In addition, the sputtering startups like Rivian (NASDAQ:RIVN) and Lucid (NASDAQ:LCID) pose no real threat to Tesla’s path. Their bottom-line hemorrhage signals a loss on every vehicle sold today. In every aspect, Tesla commands the lead. The stronghold of customer loyalty adds to the advantage. As interest rates coast downward and EV demand recharges, Tesla finds itself on an open road to growth. With 99% of cars still running on gas, the company’s journey to expansion towers ahead, rivaling no other in seizing these trends as effectively as Tesla.

Powering Forward: Li Auto (LI)

The steering wheel and dashboard inside Li Auto electric car. Interior of Li Auto EV. Li Auto Also known as Li Xiang, is a Chinese electric vehicle company

Source: Robert Way / Shutterstock.com

Unlike the vast majority of electric vehicle stocks, Li Auto (NASDAQ:LI) emerges as a bright beacon over the past year, deftly dodging the industry-wide slowdown. While competitors have faced a turbulent drop in their stock prices, Li Auto continues its steady momentum. Yet, the company recently stumbled after revising its Q1 delivery expectations downward by 24%.

Even with this slight detour, Li Auto seems primed to outperform predictions. In the month of February alone, the company drove out 20,251 vehicles, marking a 22% rise year-over-year. The slight deceleration stemmed from inventory inadequacies during the Chinese New Year festivities. Nonetheless, Li Auto still anticipates rapid growth compared to the competition throughout the full first quarter.

Despite robust operational metrics, LI stock trades at a mere 16-times forward earnings and 1.1-times forward sales. This appears strikingly affordable amidst the backdrop of money-draining EV startups with cloudy horizons.

The recent slowdown in guidance appears to be nothing more than a pothole along the road. Fueled by sturdy demand in China, Li Auto stands on the cusp of further market expansion and rewarding its shareholders generously.

Testing the Limits: Aehr Test Systems (AEHR)

The Bright Future of Aehr Test Systems Amidst Semiconductor Stock Slump

Position as a Critical Supplier to EV Industry

Aehr Test Systems, a key player in the semiconductor test equipment sector, has endured a challenging period due to the slowdown in electric vehicle production, impacting both automakers and their suppliers. The company’s stock price has plummeted by a staggering 72% from its peak last September.

As a provider of essential test and burn-in equipment for validating silicon carbide chips, particularly for electric vehicles, Aehr Test Systems is well-positioned to benefit from the upcoming surge in demand as EV production accelerates once again. The necessity for rigorous testing of silicon carbide devices before integration into vehicles places Aehr at the forefront of technological advancement in the EV industry.

Potential for Remarkable Growth

Despite the recent setbacks, financial analysts are optimistic about Aehr’s future performance. Consensus estimates project a robust 30% growth in earnings for both fiscal 2024 and 2025, with revenue anticipated to rise from $77 million in 2024 to $104 million in 2026. Surprisingly, the stock is currently trading at a modest 19-times forward earnings, failing to reflect its promising long-term growth trajectory.

The subdued expectations could witness a considerable uptick if electric vehicle sales experience a quicker rebound. As the volume of EV sales picks up pace, the demand for Aehr’s chip-testing equipment is expected to follow suit, potentially surpassing current forecasts.

Looking Ahead

In the midst of a semiconductor stock slump exacerbated by the EV industry slowdown, Aehr Test Systems stands as a beacon of hope. Positioned as a critical supplier to the electric vehicle market, the company’s innovative solutions are poised to drive significant growth in the coming years.

Investors eyeing long-term opportunities in the semiconductor industry should pay close attention to Aehr Test Systems as it navigates through the current market challenges, paving the way for potential resurgence and profitability in the near future.

On the publication date, Omor Ibne Ehsan did not have any direct or indirect positions in the securities mentioned. The views expressed are solely those of the author under the InvestorPlace.com Publishing Guidelines.

Omor Ibne Ehsan is a financial writer at InvestorPlace, specializing in growth stocks with strong fundamentals and long-term potential. With a keen interest in high-risk investments like cryptocurrencies, he offers insight into various investment opportunities. You can connect with him on LinkedIn for more updates.

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