5 Best EV Stocks to Invest in October 2021

EV (electric vehicle) stocks are among the most promising investing themes for the next decade as the automotive industry pivots towards a zero-emission future. However, after the strong gains last year, EV stocks have looked weak in 2021.

Meanwhile, after the fall some of the names have started to look attractive. Here are the five best EV stocks that you can buy in October 2021.

1. Xpeng Motors (NYSE: XPEV)

Xpeng Motors stock is down 14.6% so far in 2021 and now trades at a discount of almost 50% from the 52-week highs that it hit in November 2020. Meanwhile, after the sharp fall from the peaks, XPEV looks like a good Chinese EV stock to buy in October. Xpeng Motors delivered 10,412 electric cars in September which was almost triple what it delivered in the corresponding month last year.

Xpeng outperformed Chinese EV stocks in Q3 deliveries

In the third quarter, Xpeng Motors delivered a total of 25,666 cars which were ahead of what NIO and Li Auto delivered in the quarter. The rising deliveries are leading to strong topline growth for Xpeng Motors and have also helped it improve on the margins. It posted a gross profit margin of 11.9% in the second quarter of 2021 as compared to a negative margin of 2.7% in the second quarter of 2020. The gross margin also improved sequentially as the Chinese EV maker had posted a gross profit margin of 11.2% in the first quarter.

As deliveries continue to rise and Xpeng Motors reaches economies of scale, the margins would expand further. The company is also looking at international expansion, and like fellow Chinese EV company NIO, it is entering the Norway market.

With an NTM (next-12 months) EV (enterprise value)-to-sales multiple of 7.3x, XPEV looks a reasonably valued EV stock. As China takes the global lead in zero-emission cars, XPEV looks among the best Chinese EV stocks to buy in October.

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2. NIO (NYSE: NIO)

NIO is among the most popular Chinese EV stocks. The stock is down almost a third in 2021 and is underperforming Chinese EV stocks. Meanwhile, if you are looking to invest in a quality Chinese EV name for the long term, NIO looks like a good bet. Last week, Goldman Sachs also turned bullish on the stock and upgraded it from a neutral to buy while maintaining a $56 target price.

What makes Goldman Sachs bullish on NIO

Goldman Sachs is bullish on NIO due to its premium brand positioning, upcoming ET7 sedan model, and battery-as-a-service proposition. Commenting on ET7, Goldman Sachs analyst Fei Fang said “The price point makes ET7 China’s most expensive car model ever launched by domestic manufacturers, strengthening Nio’s brand equity in the premium space.”

NIO is a differentiated Chinese EV stock

NIO’s premium brand positioning makes it a differentiated Chinese EV stock to buy. The company also has the tacit support of the government and it bailed out the company last year when it was facing a survival battle. China has also created a subsidy category for companies that provide battery replacements service where only NIO qualifies. By providing battery replacement service, NIO is able to bring down the initial vehicle cost as the buyer can buy the car without the battery.

The company’s performance has also improved over the last year and from posting negative gross margins, it is now posting double-digit gross margins.

As NIO scales up its deliveries further and forays into more international markets after Norway, its sales should rise multi-fold over the next decade. Wall Street analysts are also bullish on NIO and its median target price of $59.20 is a 65% premium over current prices. The stock’s valuations look reasonable and the current NTM EV-to-sales multiple of 7.5x is almost the lowest that we’ve seen over the last year.

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3. Arrival (NYSE: ARVL)

Arrival is a British EV startup company that went public through a reverse merger with CIIG Merger Corp. The stock has looked weak since the merger amid the broader sell-off in growth names. Arrival is currently a pre-revenue company and analysts expect it to post revenues of $595 million in 2021. The company is targeting the commercial EV market and would compete with the likes of Rivian which is backed by Amazon.

Wall Street finds ARVL a good EV stock to buy

Of the four analysts polled by CNN Business, three rate ARVL as a buy while one analyst has a hold rating. Its median target price of $23.92 is a premium of 65% over current prices. During the merger presentation, Arrival said that expects to post revenues of $14.1 billion in 2024. The company’s current market cap s around $9 billion which gives us 2024 price-to-sales multiple of only about 0.63x. The multiples look quite attractive if the company can deliver on the projections.

Overall, ARVL looks like a good EV stock to buy in the commercial electric vehicle market. As companies globally convert their fleet to zero-emission vehicles, companies like Arrival would stand to benefit.

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4. Fisker (NYSE: FSR)

Fisker is also a pre-revenue electric vehicle startup company. It also went public through a SPAC reverse merger which has been the preferred listing mechanism for startup EV companies. FSR stock is down over 10% this year but trades at a premium of 35% to the SPAC IPO price of $10. Meanwhile, FSR looks among the best EV stocks to buy.

FSR is among the cheapest EV stocks

With a market cap of only about $4 billion, FSR is among the cheapest EV stocks in the market. Unlike Tesla, which sets up its own Gigafactories to produce cars, FSR has gone for third-party tie-ups. The company expects to begin production of its first vehicle, the Ocean SUV in Europe next year. It has partnered with Magna to produce the vehicle.

For its second vehicle named Project Pear, Fisker has partnered with Foxconn to produce the vehicle. The company has priced its vehicles competitively and can give a tough fight to other electric vehicle companies. Fisker has a clean state unlike some of the other startup EV companies like Lordstown and Nikola which makes it a good bet to play the start-up EV space.

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5. Ford (NYSE: F)

When we think of EV stocks, we tend to overlook legacy automakers. However, legacy automakers have also ramped up vehicle electrification plans and are giving a tough fight to pure-play EV companies. Ford is among the legacy automakers that have doubled down on electric vehicles.

Under the leadership of its CEO Jim Farley the company has been aggressively pivoting towards zero-emission cars. While the company hasn’t yet put a hard deadline for selling ICE (internal combustion engine) cars in the US like General Motors, it has said that by 2030 it will sell only EVs in Europe.

Ford is a good EV stock to buy

Last month, Ford said that along with SK Innovation, it will invest $11.4 billion towards EV and battery plants. Notably, the battery is the most important hardware element of an electric car. A higher battery range helps address the range anxiety and also acts as a competitive advantage.

Ford has already launched all-electric models of several of its best-selling models and next year, we’ll get the F-150 all-electric model. The ICE version of the F-150 has been America’s best-selling pickup for over three decades. The model will compete with Endurance pickup from Lordstown and Cybertruck from Tesla. Meanwhile, the launch of Cybertruck has been delayed amid supply chain issues.

With an NTM PE multiple of only about 10x, Ford looks among the best EV stocks to buy and bet on a zero-emission future of the automotive industry.

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