Electric vehicle (EV) stocks have evolved past their initial, sentiment-driven growth phase. A few years ago, EVs were supposed to be the next big thing in the market, and everyone wanted to jump on the bandwagon, but that’s no longer the case.
Several new challenges are emerging now that EVs are slowly penetrating the markets. They range from charging infrastructure to cost incentives related to buying EVs that differ from region to region.
Now, the growth of EV stocks may be driven by factors different from purely market sentiment. However, not all factors will impact all EV stocks in the same way. EVs that are replacing conventional personal vehicles on the road are affected by different market/economic forces than EV buses and trucks.
An EV company that may experience powerful growth in 2024
Lion Electric (TSX: LEV) has been around since 2008, though it only joined the ranks of publicly traded companies in 2021. It manufactures all-electric school buses and trucks and has developed over 1,600 units so far that have completed over 19 million miles, mostly on North American roads.
Electric school buses are its primary specialty, and it has already shipped over 1,400 of those and has orders to manufacture another 2,000 units.
Being a well-established leader in this space is why this EV company is poised for explosive growth. The EV school bus fleet conversion is still quite slow in Canada, but it’s accelerating in the United States. The Environmental Protection Agency (EPA) has issued another US$1 billion for electrical buses, which may lead to new orders and more business for manufacturers like Lion Electric.
The company has another edge. Apart from manufacturing EV buses and trucks, it also offers a wide range of services useful for existing and prospective customers.
This includes its infrastructure services for charging EV buses, telematics solutions that allow owners of these buses to track performance and maintenance needs, and a financial team that can help prospective clients (like schools and school districts) apply and qualify for financial grants to buy EVs. This makes it a great prospect, and not just from an ESG (environmental, social, and governance) investing perspective.
The financials, while not healthy per se, are moving in the right direction. The revenues are growing at a decent pace, and the company may be on track to turning a profit in the coming year.
The stock
Apart from a bit of positive upward momentum initially, the stock has only gone down since its inception. It has lost over 89% of its original value, and the trend doesn’t seem to be turning in the right direction. It’s currently trading at just $2.3 per share, a far cry from its 2021 peak of $24 per share.
However, this massive discount may actually be in the favour of investors when the stock finally turns bullish. If a bull market phase can push the stock up to and beyond its initial public offering price, you may experience roughly 10X capital appreciation or more if you buy it now at its discounted price.
Foolish takeaway
The stock may be too beaten up for many investors to trust, and if you want to play it safe, you may wait for enough positive momentum to build up before you buy this stock. You should also keep the risk associated with the stock, like a significant amount of debt it carries and a relatively small cash pile.
