Forgot TSLA? 2 EV stocks to play boom, from Citi and HSBC
Tesla might be ahead of the pack when it comes to electric vehicles, but it’s not the only option for investors looking for exposure to the sector. Earlier this month, the EV behemoth reported mixed results, beating analysts’ expectations on earnings but missing revenue estimates. Morgan Stanley last week lowered its price target on Tesla from $350 a share to $330 after the earnings release, citing unexpected headwinds in the fourth quarter and beyond. Analyst Adam Jonas said future valuations must take into account foreign exchange pressures, demand destruction and inflated input costs. Citigroup said in a note dated October 21 that it remains bullish on the long-term global electrification trend. However, along with HSBC in a separate note, it said investors looking to cash in on the long-term growth potential of electric vehicles could instead turn to names in the battery supply chain. Stock Picks Both Citi and HSBC count Contemporary Amperex Technology ( CATL ) and Albemarle Corp among their top picks to take advantage of growing demand for lithium-ion batteries. Citi also says CATL is the best choice in the battery supply chain, describing the company as a “battery leader.” A weakening demand outlook for electric vehicles and concerns about the impact of the Anti-Inflation Act have also already factored into CATL’s share price, Citi added. The bank has a price target of 557 Chinese yuan ($76.80) on the stock, representing a potential upside of 49.3% from its closing price of about 373 Chinese yuan on Oct. 31. Citi also likes the Albemarle. “The EV battery market clearly needs tons, and we believe ALB is the best-positioned lithium producer to capture scale with its existing world-class assets,” Citi analyst PJ Juvekar wrote on Oct. 21. Read more Tech stocks fall, but one fund manager still likes Microsoft. Here’s why these ‘all-weather’ stocks can protect your portfolio in a recession: Citi’s top fund manager said the company is better positioned to benefit from higher prices than last cycle after aggressively restructuring contracts to more variable prices, he added is Juvekar. Albemarle shares closed at around $280 on October 30. Citi has a $345 price target on the stock, implying a potential upside of 23.2%. Battery boom HSBC predicts that demand for lithium-ion batteries for vehicles will grow at a compound rate of 32% until 2030. “Over the same period, the average selling price of a lithium-ion battery is expected to fall by 43%, making it more affordable for the emerging EV transportation sector,” HSBC strategists, led by Amit Shrivastav, said on Oct. 26. The bank expects the global energy storage market to attract investments of $662 billion between 2019 and 2040. Meanwhile, Citi estimates Global EV penetration will reach 55% by 2030. The bank sees global demand for EV batteries and energy storage systems growing 62% this year and a further 29% in 2023.
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