Cutting down emissions to net zero is one of the world’s most ambitious goals, thanks to the Paris climate agreement. That goal is being taken so seriously that BloombergNEF recently reported that the amount invested in the green energy transition will reach a staggering $1.8 trillion in 2023.
But for the world to achieve net zero status, shifting our transportation’s reliance from internal combustion engines to electrical vehicles will have to be accelerated. Last year, global sales of EVs, including BEVs, PHEVs (Plug-in Hybrid Electric Vehicles), and FCVs (Fuel Cell Vehicles), reached 13 million units in 2023, representing a 29.8% growth compared to 2022.
At the same time, the world put $634 billion toward electric vehicles and charging technology in 2023, or 85% of its total investment in clean technologies that consume energy, according to BloombergNEF, which drew more spending than renewables for the first time.
Over the past couple of months, the electric vehicle (EV) sector has been going through turbulent times against the backdrop of macroeconomic headwinds and intense competition. This has caused the markets to overreact to the downside, creating opportunities for buying EV stocks at a valuation gap.
In our view, even the slightest of positives could translate into a significant rally from oversold levels for EV stocks. And it's not only pure EV makers that will benefit from this trend but also the picks and shovels of the industry, like battery makers. Here are four stocks to add to your watchlist.
VivoPower International (NASDAQ:VVPR) is a sustainable energy solutions company that has recently been making headlines in the EV space.
Through its subsidiary Tembo e-LV, vivopower develops and distributes conversion kits with all the parts required to convert a vehicle from an internal combustion engine to an EV. These include the motors, batteries, transmission, charger, software, and the rest of the components that make the converted vehicle work.
Tembo’s value proposition here is that users will incur lower maintenance and operational costs, less downtime, and won’t have the need for expensive fuel infrastructure.
This unique approach to electrifying vehicles has shown massive potential since it's much more cost-effective than outright buying a new one. To better illustrate this, VivoPower International (NASDAQ:VVPR) recently secured an order commitment of more than 5000 kits (1,000 for Jordan and 4,000 for Kenya) and an order pipeline of another 10,000+ kits.
What’s most exciting about these orders is that they could be just the tip of the iceberg. Jordan offers the perfect entry point to the Middle East EV market, which experts project will grow at a CAGR of about 28.9% till 2030. The Middle East is also the world’s largest landcruiser market, which is perfectly suited for Tembo's conversion kits. On the other hand, Kenya provides vivopower with the means to establish a foothold in the second-hand vehicle conversion market, which some estimate has a value of about $2 billion.
Although VivoPower International's (NASDAQ:VVPR) entry into the EV market has already rewarded a number of early shareholders with triple-digit returns, the stock appears to still have room for further upside based on a number of catalysts.
For starters, the company recently announced that Tembo would go public via a merger with Cactus Acquisition Corp. 1 Limited (CCTS), a NASDAQ-listed SPAC, and change its name to Tembo Group. According to the details of the transaction, CCTS will issue 83.8 million shares at $10 per CCTS share in exchange for Tembo shares, which implies a valuation of $838 million. In addition to that, a bonus of 16.76 million Tembo Dividend Shares will be distributed to VivoPower shareholders, who will receive 5 Tembo Group shares for each VivoPower share held.
Assuming a conservative IPO price of just $1 per Tembo share instead of $10, it would mean that VivoPower International (NASDAQ:VVPR) shares are worth at least $28 each.
While that potential upside may appear too good to be true, it is further supported by the fact that Vivopower received a direct investment of $5 million into Tembo at a pre-money valuation of $120 million from a private investment office of a member of the ruling Al Maktoum family of Dubai. For context, Vivopower currently has a market cap of just $12 million.
That investment not only reaffirms investor interest in the Middle East and Africa’s EV market but also in vivopower’s long-term growth prospects. Furthermore, the company recently announced that executive chairman and CEO Kevin Chin increased his individual shareholding in the company by 146,084 shares (about 4.4% of the outstanding shares) to increase his shareholding to 12.3%.
Going forward, VivoPower International (NASDAQ:VVPR) will build on its initial success in the Middle East and Africa to continue its Asia expansion after signing a definitive joint venture agreement with Francisco Motor Corporation to develop and supply electric utility vehicle electrification kits for a new generation of electric jeepneys (e-jeepneys) in the Philippines.
Li Auto (NASDAQ:LI) designs, develops, manufactures, and sells premium smart electric vehicles. The China-based EV maker has clearly been the strongest performer recently in the lackluster EV space. Li Auto remains by far the fastest-growing, well-established EV maker out there.
The company recently launched the Li L6, a five-seat premium family SUV that will offer Pro and Max trims in spite of the recent weakness in the market, signaling that the long-term fundamentals still remain strong.
In the meantime, however, Li Auto has resorted to price cuts to deal with the softening demand. The car maker announced price cuts for four out of the five models it produces. We're talking about roughly 5% of the existing sale price, or about $4,100 off of what it's selling for right now.
The price cuts came as new data showed that, for the first time, China sold more electric and hybrid cars than internal-combustion vehicles. Retail sales of new-energy cars, which include EVs and plug-in hybrids, made up 50.4% of all passenger-vehicle sales in the first two weeks of April, according to data from the China Passenger Car Association.
Li recently reported full-year 2023 earnings, where revenue grew an impressive 173.5% year-over-year to reach $17.2 billion. The company is projected to deliver 57% top-line growth in 2024, with consensus estimates calling for $27 billion in sales this year. Citigroup maintains a buy rating on Li Auto stock with a $43.60 price target.
Emeren Group Ltd. (NYSE:SOL) is a renewable energy leader with a comprehensive portfolio of solar projects and independent power producer (IPP) assets, complemented by a significant global battery energy storage system (BESS) capacity.
The company recently announced a number of milestones, including that it had signed a co-development agreement for 199 MW (up to 1.59 GWh of capacity) of battery storage projects in two regions of southern Italy with Nuveen Infrastructure, one of the world's largest fund managers investing in clean energy. This agreement marks the final stage in the portfolio collaboration between Emeren and Nuveen, achieving a total power capacity of 354 MWp (up to 2.83 GWh).
SOL also announced that it had set up a 703 megawatt BESS project portfolio in Italy for Matrix Renewables under the Development Service Agreement, or DSA, which, combined with the previous sale of the 260 megawatt in Q2, amounted to a total of 963 megawatts of BESS projects. This marked a substantial advance towards the agreed portfolio target of 1.5 gigawatts in the DSA partnership with Matrix.
The company also announced the expansion of its energy storage portfolio in China by acquiring a 10.8 megawatt-hour energy storage portfolio comprising six energy storage power stations. According to its most recent filings, SOL closed FY 2023 with $104.7 million in revenue, a 22.2% gross margin, and a $9.3 million net loss. These results were below our full-year guidance, primarily due to the delays in closing the sales of six projects in the US and Europe.
FREYR Battery, Inc. (NYSE:FREY) develops clean, next-generation battery cell production capacity with a focus on the primary markets of energy storage systems ("ESS") and commercial mobility.
Last month, FREYR’s team at its Customer Qualification Plant ("CQP") reached a key milestone by producing automatically casted electrodes with active electrolyte slurry in a dry room environment, and the company expects to make functional battery cells for customer samples using full automation of CQP in H1 2024.
A key distinction between FREY’s production platform and conventional lithium-ion battery manufacturing technology is the order in which electrolyte is introduced to the process. In the 24M process, electrolyte is added at the start of cell processing, which eliminates the costly and energy-intensive step of solvent recovery by drying the electrodes.
That milestone follows another key achievement by the company, which announced that the U.S. Department of Energy (DOE) had invited the company to submit the Part II loan application under the DOE Title 17 program for FREYR’s Giga America project.
"The Part II DOE loan application invitation is an important next step in FREYR’s journey to fund our Giga America project," commented Birger Steen, FREYR’s Chief Executive Officer. "With our redomiciliation to the U.S. now approved by our shareholders, FREYR is uniquely positioned to establish the Company as the U.S.-based industrialization partner of choice for clean battery technology solutions.”
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