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In the world of electric vehicles stocks, obvious names deserve a place in the long-term portfolio. Tesla (NASDAQ:TSLA) and Li Auto (NASDAQ:LI) are likely to be sustainable value creators. At the same time, other cheap EV stocks that hold value deserve some attention.
This column focuses on three of the cheapest EV stocks that can be considered at current levels. Many associated industries and companies are likely to benefit from the rising adoption of EVs globally. These include battery manufacturers and suppliers of automotive components.
The following stocks are undervalued and represent companies with good business fundamentals. Additionally, two stocks have an attractive dividend yield, making them among the best dividend growth stocks to accumulate.
Let’s discuss the reasons to be bullish on these cheapest EV stocks.
Polestar Automotive (PSNY)
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Polestar Automotive (NASDAQ:PSNY) has plunged by almost 65% in the last 12 months. The decline is accelerating recently with Barclays warning of a soft EV market and the negative impact of equity dilution. But this sell-off may be overdone. PSNY stock has the possibility to deliver multibagger returns from current levels.
Last month, Polestar reported Q2 2023 results, and the company reiterated the guidance to deliver 60,000 to 70,000 vehicles for the year. PSNY also expects gross margin of 4% for the year. Margin improvement could be significant in 2024 on the back of operating leverage and cost cutting initiatives.
It’s worth noting that Polestar has currently commercialized two EV models. The company expect Polestar 4 production to commence in November and Polestar 3 in Q1 2024. The new models are likely to ensure that deliveries growth accelerates significantly next year and into 2025.
Panasonic Holdings (PCRFY)
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Panasonic Holdings (OTCMKTS:PCRFY), the innovation-driven company and an EV battery maker, looks attractive with a forward price-earnings ratio of 9.4. PCRFY stock also offers a dividend yield of 1.88%.
It’s worth noting that Panasonic has embarked on an aggressive expansion plan through 2031. This is the main reason to be bullish on the stock.
To put things into perspective, the company expects to increase battery production capacity from 50 gigawatt hours in March 2022 to 200 gigawatt hours by March 2031. The four-fold increase in capacity will translate into sustained revenue and cash flow growth.
Also, Panasonic is working towards a potential increase in battery density by 20% by 2030, resulting in more efficient, lightweight batteries. With capacity expansion and innovation, the company is positioned to increase its market share.
Albemarle Corporation (ALB)
Source: shutterstock.com/JLStock
Albemarle Corporation (NYSE:ALB) stock trades at a forward price-earnings ratio of 6.9 and is poising to double in the next 12 to 18 months. Additionally, the stock offers a dividend yield of 0.87%. Healthy dividend growth is likely in the coming years.
With the rising demand for EVs, lithium is a big investment theme. With strong fundamentals and robust cash flows, Albemarle is best positioned to capitalize on the opportunity. The company is on a high-growth trajectory, and 2023 revenue growth is expected to be in the range of 40% to 55%.
Further, Albemarle has guided for lithium sales volume growth of 20% to 30% through 2027. This growth is expected on the back of sustained expansion in lithium conversion capacity.
Importantly, lithium trending higher in the long-term will undoubtedly benefit Albemarle’s positioning. This will translate into higher dividends and flexibility to continue investing in capacity expansion.
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
Faisal Humayun is a senior research analyst with 12 years of industry experience in the field of credit research, equity research and financial modeling. Faisal has authored over 1,500 stock specific articles with focus on the technology, energy and commodities sector.
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