While the Covid-19 pandemic annihilated the global financial markets; wiped out three years of gains in a matter of weeks and set the record for the fastest stock market crash in history…It’s all looking up from here, thanks to a deluge of Covid-19 vaccines. Mentioned in today’s commentary includes: Tesla, Inc. (NASDAQ: TSLA), NIO Limited (NYSE: NIO), XPeng Inc. (NYSE: XPEV), Fisker Inc. (NYSE: FSR), Electrameccanica Vehicles Corp. (NASDAQ: SOLO).
The exciting developments have helped the stock markets sputter back to life after spending months of the year in the red. And the hottest sector of the market has truly turned on the afterburners: The Electric Vehicle (EV) Sector.
The EV sector boasts a 62% YTD gain vs. 13% by the S&P 500, having climbed 25% over the past 30 days alone. That’s hardly surprising considering that Wall Street is unanimous that the future of the world is electric… especially for investors in the electric vehicle sector.
Tesla Inc. (TSLA) is leading the way in America… handing investors 594% year to date. And 2021 is setting up to be even better as the world comes out of lockdown. And sales start picking up.
Elon Musk and Tesla are in the news every day, which might lead to many investors thinking they’ve missed out on the big profits. But nothing could be further from the truth. Why? Electric vehicles (EVs) currently account for only 2.5% of sales.
- Bloomberg projects EV sales to reach 28% over the next 9 years[A2].
- Deloitte projects EV sales to go even higher… hitting 32% of all sales by 2029[A3].
- The IEA projects even higher numbers… at 36%[A4].
The tide is unstoppable because the flow of profits is unstoppable. So, how are investors playing this booming new market?
The EV Story Of The Year
Simply put, there’s a lot going for Tesla that makes it a compelling long-term pick despite this year’s parabolic rally. Tesla has continued to defy bearish expectations that low oil prices would put a damper on its core business of selling electric vehicles. For the fourth consecutive quarter, the EV maker posted yet another blowout that beat top-and bottom-line expectations. More importantly, it exceeded Wall Street delivery estimates and reported record profits to boot.
Tesla reported Q3 revenue of $8.77B, good for +39.2% Y/Y growth, and $460M above Wall Street consensus. Meanwhile, non-GAAP EPS of $0.76 beat by $0.16. But more importantly, Tesla has a clear path to deliver 1M vehicles as early as 2021.
In Tesla’s Q3 earnings call, New Street Research analyst Pierre Ferragu posed to Elon Musk whether the company remains on track to deliver 1M in 2021 to which Elon replied in the affirmative. The math seems to agree with Musk’s and Ferragu’s optimism.
In its latest shareholder letter, Tesla revealed that its Fremont, California factory can churn out 500,000 Model 3 + Y units and another 90,000 Model S + X units per year. Meanwhile, Tesla’s new Shanghai factory has ramped up capacity at an incredible clip and now has the capacity for 250,000 Model 3 vehicles annually. Adding that up brings us to Ferragu’s lowball estimate of 840,000 deliveries in 2021.
The Up-And-Comer Checking All The Right Boxes
Facedrive Inc. (FD; FDVRF) offers riders a choice of electric, hybrid, or gas-powered vehicles in an easy-to-use app that’s aiming at robust growth. It is the cheapest rideshare app on the market today, bar none, driven by one megatrend: The sharing economy.
The sharing economy was already big business before Covid-19 reared its ugly head; it’s bound to become even bigger as economies everywhere recover quickly now that several viable Covid-19 vaccines could soon enter mainstream distribution.
Shared mobility, including services such as taxis, car sharing, and ride-hailing accounts for an estimated 5% of current passenger vehicle miles. BloombergNEF sees that rising exponentially with shared mobility services projected to account for 19% of the total annual mileage completed by passenger vehicles in 2040.
The economics of EVs are considerably more favorable in a sharing economy, thanks to lower fuel and maintenance costs. EVs currently account for 1.8% of the shared mobility fleet but could climb to 80% by 2040 as per Bloomberg.
The Ridesharing Market was valued at $73 billion in 2019 and is expected to reach $218 billion by 2025, good for a compound annual growth rate (CAGR) of nearly 20% over the forecast period. The increase in demand for cost-saving and time-saving transport is expected to continue driving the market. Meanwhile, the increasing cost of vehicle ownership, the need for reducing traffic for environmental concern, and government regulations promoting ridesharing options are some of the major factors driving the adoption of ridesharing services across the globe.
To take it one step further, this bustling ride-sharing company has set out to challenge the entire conventional private car ownership industry with the acquisition of Steer, a high tech Electric Vehicle subscription service.
Steer is a monthly vehicle subscription service that specializes in electric vehicles. Steer is a hassle-free, technology-driven, electric alternative to owning, leasing, or renting EVs. The subscriber simply pays one transparent, monthly fee that includes:
- Access to a virtual multi-car garage of awesome vehicles for every occasion
- Insurance, maintenance, and repairs
- Unlimited miles
- A personal concierge for hassle-free delivery
- Charging solutions for every user’s need
A Steer subscription gives the user the freedom and flexibility of driving many different cars for all their lifestyle needs. Users still get the personal ownership experience: driving the car every day and parking it at their home, but none of the wasted time at dealerships and maintenance shops. Steers provides the whole package without the headache.
With the Steer acquisition, Facedrive isn’t just looking to transform the ride-sharing business, it’s aiming to disrupt the entire private car ownership industry, completely rethinking the way people “own” cars. Its innovative hassle-free technology gives subscribers access to their own ‘virtual garage’ of low emissions vehicles. And now as more and more people opt for ride-sharing and subscription-based alternatives over car ownership, this tech-based economy could explode, putting Facedrive right at the forefront of a brand-new megatrend.
The EV Sector Is Booming
The EV sector is set to grow 14X over the next decade. Tesla and the EV sector, in general, have been on a tear, with TSLA stock boasting a 16,600% gain since IPO… and a 615% gain in the year-to-date and looking to add another 2x-5x gain over the next couple of years.
has also gotten the EV bump this year. It is another newcomer in the electric vehicle scene. And it’s a speculative one, at that, considering that It won’t start producing its EV SUVs until 2023. But again, it’s a story that looks a lot like Tesla did in the early days.
Citigroup analyst Italy Michaeli just picked up coverage of Fisker, with a “Buy” rating and a price target of $26. Michaeli gets the narrative here, reminding investors that “as a pre-revenue company, Fisker is clearly a higher-risk investment proposition”, but there’s a big reason to be bullish. Fisker has four long-term advantages here: It’s making an SUV, which Michaeli says is a good segment to target. It’s got a strong brand. It’s got a legacy behind the wheel: Henrik Fisker is Fisker’s founder and he’s a legend in automotive design. And it’s a massive saver of capital because it has an innovative “asset light” approach, getting Magna International to assemble its first vehicle. It’s already got 9,000 advance orders … prepaid.
Facedrive (FD; FDVRF), in part related to the EV industry, has seen its share price explode by 515% just this year. Thanks to the company’s multiple growth runways: EV rideshare, Food Delivery, and EV Subscription Service there should still be room for growth ahead.
EV and related industries is an incredible growth story that could mint many new millionaires, with Elon Musk himself set to become the richest man in 2021. For those that missed out on Tesla’s meteoric rise to glory, there are still a number of ways to get in on this trend.
Affordability Over Luxury
Not all EVs are about glitz and glam, either. Take Electra Meccanica Vehicles Corp (SOLO), for example. It is electric vehicle company that has turned a lot of heads this year, both on the street and on Wall Street. The Canadian company’s single-seat electric vehicle carries a lower, and more appealing price point for consumers that do not need all the bells and whistles that come with luxury brands like Tesla. It’s also on the cusp of an emerging market. In fact, demand for single-seat electric vehicles are projected to grow significantly in the coming years, and SOLO is one of the few companies in this market, representing a great opportunity for investors looking for an easy-entry EV stock with a lot of potential upside.
Electric Meccanica isn’t only interested in the niche tiny EVs, however. It’s also planning to roll out an electric sports car for two, the Tofino, and another electric two-seater boasting an old-school design that will appeal to a wide range of consumers.
Chinese Companies Are Jumping On Board
China hasn’t been left behind in the EV boom. In fact, it’s hosting some of the most exciting new companies on the market. NIO Limited (NIO), for instance, used to be an outlier in the market. In fact, much of Wall Street was to write off their losses and give up on the company. It was even on the brink of bankruptcy But China’s answer to Tesla’s dominance powered on, eclipsed estimates, and most importantly, kept its balance sheet in line. And it’s paid off. In a big way. The company has seen its share price soar from $3.24 at the start of 2020 to a high of $50 earlier this month, representing a massive 1443% returns for investors who held strong.
In November, NIO unveiled a pair of vehicles that would make even the biggest Tesla devotees truly contemplate their brand loyalty. The vehicles, meant to compete with Tesla’s Model 3, could be exactly what the company needs to take control of its domestic market.
XPeng Motors (XPEV) is a newcomer in the Chinese electric vehicle boom. Though it only recently went public in the U.S., it’s taken the market by storm. Riding on the coattails of the success of Tesla and NIO, it has carved out its own demand, especially among the younger generation of traders looking for the next big company to blow. Since its NYSE debut in August, the ambitious electric vehicle company has risen by more than 157% thanks to its promising financials and growing demand for its stylish vehicles.
And retail investors aren’t the only ones showing interest in this EV newcomer. Xpeng has also garnered a ton of interest from Big Money. Earlier in 2020 the company raised over half a billion dollars from giants like Aspex, Coatue, Hillhouse Capital and Sequoia Capital China. Recently, Xpeng has even secured another $400 million from heavy hitters such as Alibaba, Qatar Investment Authority and Abu Dhabi’s sovereign wealth fund Mubadala.