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Wall Street Sees a Higher Upside Potential in this EV Stock

Story Highlights

Stocks of electric vehicle makers are in the red so far this year amid prolonged supply chain issues and fears of an impending recession. However, given the solid demand for EVs, Wall Street analysts continue to be bullish on several companies. So which EV stock could drive a higher upside potential from current levels?

The demand for electric vehicles (EVs) continues to be strong amid rising fuel costs and the growing focus of governments across the globe to bring down emissions. Though June sales numbers of some EV makers have been encouraging, supply chain issues, chip shortage, and the impact of a potential recession continue to haunt the broader industry. Using the TipRanks Stock Comparison tool, we will pit Ford, Nio, and General Motors against each other to pick the EV stock with a higher upside potential.  

Ford (NYSE: F)

Ford’s June sales surged 31.5% to 152,262 vehicles. As per the company, it bucked the downward industry trend, which saw a 11% sales decline on the month.   

Ford’s June sales were driven by the demand for the F-Series, Explorer, and Expedition, along with continued strength in battery EVs. June sales of Ford’s EVs came in at 4,353, up 76.6% from the prior-year quarter. Ford’s EV portfolio includes F-150 Lightning, Mustang Mach-E, and E-Transit.

Despite stellar June figures, Ford stock fell 1.06% on July 5, as the company’s Q2 sales missed expectations. Q2 sales increased 1.8% to 483,688 vehicles, falling short of analysts’ growth expectations in the range of 3.3% to 5.1%. Q2 sales were impacted by chip shortage and industry-wide supply constraints.

Looking ahead, Ford is making significant investments to expand its presence in the attractive EV space. The company plans to invest $50 billion on EVs through 2026, with the goal to produce 2 million EVs per year globally by the end of 2026.    

Overall, the Street is cautiously optimistic on Ford stock, with a Moderate Buy consensus rating based on seven Buys, nine Holds, and one Sell. At $18.18, the average Ford price target implies 67.95% upside potential from current levels.

Nio (NYSE: NIO)

After facing supply chain and production issues due to COVID-19 lockdowns in China, Nio and its EV peers recently reported strong June deliveries fueled by easing restrictions. Nio’s June deliveries surged 60.3% year-over-year to 12,961 vehicles. Overall, Nio delivered 25,059 vehicles in the second quarter, up 14.4% from the prior-year quarter.

Nio continues to launch new models to capture demand in China, the world’s largest EV market. The company is also expanding its presence in Europe, a lucrative EV market.

In June, NIO launched the ES7 five-seater electric SUV, which is the company’s first SUV based on its latest technology platform – NIO Technology 2.0. Additionally, NIO also launched the 2022 ES8, ES6, and EC6 vehicles, equipped with upgraded features, like the digital cockpit domain controller and sensing suite. The deliveries of the ES7 and the new versions of ES8, ES6 and EC6 are expected to commence in August 2022.

Meanwhile, Nomura analyst Martin Heung lowered his price target for Nio stock to $25.80 from $51.50, and maintained a Buy rating. Heung noted that concerns over the company’s ES7 SUV model’s revenue contribution may persist. The analyst pointed that Nio’s mass-market brand is highly priced, which will limit the size of the client base it can reach.

Nio earns a Strong Buy consensus rating backed by 10 unanimous Buys. The average Nio price target of $33.66 implies 51.76% upside potential from current levels.

General Motors (NYSE: GM)

General Motors’ Q2 sales fell 15% to 582,401 vehicles in the U.S. due to weak wholesale volumes. That said, the company’s sales came slightly ahead of analysts’ expectations of 16% to 17% decline. Also, GM maintained its full-year guidance even though the company held about 95,000 vehicles in its inventory as they were manufactured without some components due to supply constraints.  

GM’s Q2 EV sales were over 7,300 units, including the first deliveries of the BrightDrop Zevo 600 and GMC Hummer EV Pickup, and the resumption of Chevrolet Bolt EV and Bolt EUV (electric utility vehicle) production.

Earlier this year, GM announced that it would be investing over $7 billion in its home state Michigan through 2024, to boost its electric truck production and build a new EV battery cell plant. It aims to increase its EV production capacity in North America to over 1 million vehicles by 2025.   

Following the Q2 sales update, Barclays analyst Brian Johnson lowered his Q2 EPS estimate for General Motors to $1.25 from $1.60. The estimate revision was triggered by the company’s plans to hold 95,000 units in inventory until they are completed, and to recognize revenue when these vehicles are sold to dealers as the year progresses.

However, Johnson maintained his full-year estimates and sees the supply constraints as transitory. He reiterated a Buy rating on GM stock with a price target of $52.

Overall, General Motors earns the Street’s Strong Buy consensus rating based on 13 Buys, two Holds, and one Sell. The average General Motors price target of $57.07 implies 76.31% of upside potential from current levels.

Conclusion

Shares of Ford, Nio, and General Motors have plunged nearly 46%, 30%, and 45%, respectively, year-to-date. While supply chain pressures and higher input costs might continue to impact near-term growth, these companies are well-positioned to capture the increasing global demand for EVs.

Currently, Wall Street analysts seem to be more optimistic about Nio and General Motors, while they are treading cautiously with regard to Ford. If we consider the upside potential from current levels, then General Motors stock seems to be a better pick.

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