Everyone knows by now that electric vehicles (EVs) are the future and sector leader Tesla is already a world-famous brand.
While those that cottoned on early to the opportunity have done well by backing Tesla, the sector presents plenty of other opportunities for investors, especially now that government policies are tilting heavily in EVs’ favor.
Recent times have seen the passing of the Inflation Reduction Act (IRA) which contains initiatives and tax credits to help accelerate EV adoption, while the Bipartisan Infrastructure Law includes an EPA program which offers rebates for school districts, school bus operators and contractors which replace current school buses with clean and zero-emission (ZE) models.
So, let’s put Tesla aside and check out other less obvious opportunities in the space. We pulled out of the TipRanks database two EV makers which stand to gain from these new policies, and which also get the backing of the Street’s experts; both are rated as Strong Buys by the analyst consensus and offer ample upside potential from here.
Lion Electric Company (LEV)
We’ll start with Lion Electric, a Canadian manufacturer of all-electric medium-and heavy-duty vehicles. Its current line up boasts seven mid-range truck and bus models including the all-electric class 6 and class 8 commercial urban trucks (LION 6 and LION 8), the all-electric midi/minibus the LionM, and the LionC, an all-electric Type C school bus.
The company is aiming to boost capacity in a big way with a new 900,000 sq. ft. manufacturing facility in Joliet, where it expects production will begin by the end of the year. This is to accommodate the expanding order book for its electric buses and trucks.
The offerings are already seeing decent growth, albeit still on a small scale. In 2Q22, the company delivered a record 105 units which consisted of 90 EV school buses (EVSB) and 15 commercial electric trucks, an increase over the 72 EVSBs and 12 trucks delivered in 1Q22 and the 48 EVSBs and 13 trucks delivered in the same period a year ago.
The sales resulted in a top-line of $29.5 million, amounting to a 76.8% year-over-year increase. On the bottom-line, the company saw adjusted EBITDA of negative $14.4 million, resulting in Adj. EPS of -$0.07. LEV’s $575 million vehicle order book currently includes 2,357 vehicles.
As far as green government initiatives go, the company stands to benefit from positive policies both in its native Canada and the U.S., as noted by Roth Capital’s Craig Irwin.
“The recently launched Canadian iMHZEV Program for zero-emmission medium and heavy-duty trucks and $5bn U.S. federal funding for EV School Buses are key pieces of support for what we expect will become a vibrant HD EV market in 2023,” the analyst said. “We see release of U.S. EV School Bus vouchers beginning this fall as a key catalyst for the stock… The Canadian programs coupled with the US EPA’s $5bn Clean School Bus program should support accelerating deliveries.”
Citing its “clear leadership in the EV School Bus space,” Irwin rates LEV shares a Buy while his $13 price target suggests they are undervalued by a huge 437%. (To watch Irwin’s track record, click here)
Almost all of Irwin’s colleagues agree this is a stock to back; LEV has picked up 7 analyst reviews in recent months, with 6 Buys and 1 Hold making for a Strong Buy consensus rating. The stock’s $8.14 average price target suggests it has a robust 236% upside from the current trading price of $2.42. (See LEV stock forecast on TipRanks)
GreenPower Motor Company (GP)
Let’s now check in with another Canadian EV manufacturer, GreenPower Motor. GP’s line up consists of offerings for the passenger transportation sector (the EV Star and the EV Star Plus), for cargo transportation (the EV Star Cargo and the EV Star Cargo Plus), student transportation (the electric school bus the BEAST (Battery Electric Automotive School Transportation) and its little brother the Nano BEAST, which the company touts as the market’s only purpose-built, zero-emission, Type A school bus. The latter was recently awarded the School Transportation News Innovation Award for Best Green Bus Technology.
The line up might be deep and varied but it is still early days on the sales front. The company generated revenue of $3.85 million in its fiscal first quarter report (June quarter). That amounted to an increase of 44.8% over the same period a year ago, although the figure landed $2 million short of the consensus estimate. While gross profit margins of 28% were below the 33% reported a year ago, they represented a sequential uptick over the 12.5% notched in the previous quarter. All told, the company reported a net loss of $4.35 million in the quarter.
Despite missing expectations, B. Riley analyst Christopher Souther thinks patient investors will be rewarded eventually.
“GreenPower appears to be on the cusp of the step-change in revenue that we have been waiting for, though the timing may not be as near term as we anticipated,” said the analyst. “We believe visibility should be meaningfully improved by the FY2Q22 call in November, especially given recent policy initiatives in the U.S. and Canada. We expect GreenPower to benefit from provisions in the Inflation Reduction Act, the EPA’s new Clean School Bus Program in the U.S., and recent supportive policy in Canada.”
Based on all of the above, it’s no wonder Souther reiterated his Buy rating on GP shares. With a price tag of $6, the analyst believes shares could surge 212% in the next twelve months. (To watch Souther’s track record, click here)
Souther’s expectations appear relatively tame compared to some of his colleagues’ predictions; the average price target currently stands at $11.75, making room for one-year returns of a lofty 493%. Overall, all 4 analyst reviews on file are positive, providing this stock with a Strong Buy consensus rating. (See GP Motor stock forecast on TipRanks)
To find good ideas for EV stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.
Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
