Advance Cautiously In Electric Vehicle Stocks, Says This Portfolio Manager
The promise is huge, but so are the multiples on some EV stocks today, making investing in the industry risky at best and an outright gamble in some cases. One way to approach the space, says portfolio manager Brendan Caldwell, is to think of EV companies not as automakers per se, but as technology companies where innovation rather than production volumes will dictate. success or failure.
âIt’s a tough industry,â said Caldwell, president and CEO of Caldwell Investment Management, speaking Tuesday in a segment of BNN Bloomberg. “I think Tesla is something at an order of magnitude of 130 times the profits – and that’s ultimately profit, not the money they’re making or not making right now.”
It has been a wild ride for fans of investments in electric vehicles this year, on the one hand with You’re here (Tesla Stock Quote Charts, News, Analysts, Financials NASDAQ: TSLA) is exploding into (briefly) a trillion dollar company and Rivian van that debuted last month with much fanfare but results so far. present without interest. Other names like Nikola Corp, Nio Inc and Canoo are in the mix.
In Canada, investors have The Electric Lion (The Lion Electric Stock Quote Charts, News, Analysts, Financials TSX: LEV) which covered the news on the contracts won for its electric buses and its fuel cell manufacturer Ballard Power (Ballard Power Stock Quote Charts, News, Analysts , Financials TSX: BLDP), both of which are down about half for 2021.
While traditional automakers are also targeting the electric vehicle market, the news on this front has been monumental, with companies like Volkswagen pledging to transform its fleet to 70% electric by 2030 and fully electric by 2035. and Toyota aiming to bring 70 different vehicles. electric vehicle models on the road by 2025.
The field certainly has its share of tailwinds, as governments around the world rely on the electrification of transportation as a key part of their climate change puzzles and not just building infrastructure to support electric vehicles on the road, but are wooing automakers and battery makers to set shopping locally to help secure sought-after factory jobs.
For investors, however, the challenge is where to put your money. You could go for a high-risk newcomer like Rivian or maybe a proven auto company like Ford or Volkswagen, but either way, it’s innovation that will drive development in the industry, Caldwell says, and that means. that you should look at the technology behind the business.
âIt’s a pretty difficult industry from an evaluation standpoint,â Caldwell said. âYou see a lot of old school automakers entering the electric vehicle market. It is on the one hand. On the other hand, the reason you would buy EV inventory right now is to say that it is not vehicle inventory at all.
âThey are, in fact, a way to transform his life. These are computer actions, these are technological actions, there is something more than just moving the person from A to B, âhe said.
âI think there will be huge opportunities in this space, but I think what we are learning during this COVID time is that the need, desire and methodology of people to go from A to B’s are going to change, “Caldwell said. “I have four children of driving age, only one has a [drivers license]. The next generation is not used to driving like you and I took that as a feeling of freedom. So I think you’re going to have to look at EV inventory in a transformative way.
One of Tesla’s supposed advantages is in its data collection where the company’s ability to install more and more sensors on its vehicles has put its automotive technology light years ahead of its competition.
Tesla’s rise in October and November coincided with rental company Hertz’s announcement that it would buy 100,000 electric vehicles from Tesla, but the stock has since lost much of that rebound in recent weeks.
Commenting on Hertz’s announcement, Goldman Sachs analyst Mark Delaney said Tesla likely had a lot more room to grow in rental cars with Hertz, of which 100,000 Tesla would account for around 20% of its fleet.
âWe expect that there will be continued opportunities in this channel. Hertz typically only owns vehicles for a few years according to its statements, which suggests additional sales over time, and this news could also prompt other rental fleets to switch more quickly to electric vehicles, âDelaney said in an October 27 report.
Delaney maintained his ‘Buy’ rating on Tesla while increasing his target price from $ 905 to $ 1,125 per share, saying, âWe think this is important news for Tesla, and although the 100,000 order is important on its own, we also believe that it will help the company maintain strong growth and margins when considering the order in the context of other dynamics.