The 7 Best Battery Stocks to Buy in December
Some of the best battery stocks have underperformed this year. The correction has been in-sync with the downside in electric vehicle stocks. There is however no doubt on the point that the best part of growth for electric vehicles is still to come.
Global EV penetration has increased to 8.8% in 2021. It’s expected that by 2030, electric vehicles will represent more than 60% of vehicles sold globally. If this target is achieved, battery demand is likely to remain robust in the coming years.
There are some big numbers here as well. The International Energy Agency expects EV battery demand to increase to 3,500GWh by 2030 from current levels of 340GWh. The correction presents a golden opportunity to accumulate some of the best battery stocks.
My portfolio of battery stocks would include traditional lithium battery suppliers and companies with lithium assets. Additionally, companies working on the commercialization of solid-state batteries are high-risk bets worth considering.
Let’s talk about seven of the best battery stocks to buy.
Panasonic Holdings (PCRFY)
Amidst volatility, Panasonic Holdings (OTCMKTS:PCRFY) stock has been sideways in the last six months. At a forward price-earnings ratio of 12.5, the 2.4% dividend yield stock looks attractive.
Panasonic has been pursuing investments to boost growth and market share. The company is investing $4 billion in an EV battery plant in Kansas. There is an additional plan for a second plant in Oklahoma with an investment of $4 billion.
Panasonic is also planning a new battery plant in Japan as part of a joint venture with Toyota Motor (NYSE:TM). With these investments in the pipeline, the outlook is positive for Panasonic.
It’s also worth noting that Panasonic has been investing in innovation. The company is just behind Toyota in solid-state battery patents. The innovation factor will ensure that the company potentially increases market share in the coming years.
Overall, PCRFY is the top battery stock to hold in the portfolio. Considering a five-year investment horizon, multi-bagger returns seem likely.
Albemarle Corporation (ALB)
With the surge in demand for lithium batteries, it’s anticipated that there will be a shortage of lithium. One report indicates that by 2035, the supply gap will be acute at 1.1 million metric tons. Lithium is therefore an attractive investment theme and Albemarle Corporation (NYSE:ALB) is a quality stock to consider.
The company has already been delivering solid results on the back of higher lithium production and price realization. For Q3 2022, Albemarle reported revenue and EBITDA growth of 152% and 447% on a year-on-year basis.
At the end of 2021, Albemarle reported a lithium conversion capacity of 85ktpa. By the end of the year, the company expects to boost capacity to 200ktpa. Additionally, Albemarle has a target to achieve a conversion capacity of 450 to 500ktpa by 2030. This provides clear visibility for cash flow upside.
ALB stock already has an annual dividend of $1.58. With the planned expansion, ALB is among the attractive dividend growth stocks to consider.
Lithium Americas (LAC)
Lithium Americas (NYSE:LAC) stock is also among the best battery stocks to buy. It’s another name among lithium producers that has a bright long-term outlook.
As an overview, Lithium Americas has quality assets in the United States and Argentina. The company has a 100% stake in the U.S. asset that’s likely to deliver an average annual EBITDA of $520 million. Furthermore, Lithium Americas has 44.8% stake in the Argentina asset that has an average annual EBITDA potential of $308 million.
Last month, the company announced the separation of both assets into two separate companies. Lithium Americas will continue to focus on lithium assets in the U.S. Also, Lithium International will be focused on assets outside North America. This decision is likely to translate into value unlocking.
From a financial perspective, Lithium Americas reported $392 million in cash as of Q3. The company also has $75 million available in credit. With an impending split into two entities, I don’t see any financing concerns.
Solid Power (SLDP)
Solid Power (NASDAQ:SLDP) stock is among the high-risk battery stocks to consider. The company is working on the commercialization of all-solid-state battery cells. With the technology still under validation, the risk seems to be high. However, if successfully commercialized, solid-state batteries will have a big addressable market.
Solid Power announced the installation of EV cell pilot line in June. The pilot line can produce 15,000 cells per year. The company expects to deliver silicon EV cells to automotive partners in 2023.
This is likely to be an important milestone as validation from automotive partners would accelerate technology commercialization. With Ford and BMW (OTCMKTS:BMWYY) as partners and investors, the company has strong financial backing.
SLDP stock has been in correction mode as commercialization is still years away. However, current levels look attractive for a reversal rally in the next few quarters.
QuantumScape Corporation (QS)
QuantumScape (NYSE:QS) is also involved in the commercialization of solid-state lithium metal batteries. QS stock has also been in a correction mode through 2022 and looks attractive at $7.4.
It’s worth noting that the company’s automotive partner is Volkswagen (OTCMKTS:VWAGY). This underscores the view that automobile companies are backing the development of solid-state batteries.
With commercialization not coming anytime soon, another positive is that QuantumScape has guided to close 2022 with cash of $1 billion. The company seems to be fully financed for the next 24 months.
QuantumScape is working with Volkswagen for a pilot facility in the U.S. or Germany. Once the solid-state battery undergoes validation testing, QS stock is likely to inch higher.
QuantumScape is also exploring the possibility of taking the technology beyond automobiles. The company believes that the consumer electronics sector market potential is $14 billion by 2025. Therefore, there is significant growth potential in the coming decade.
Ford (NYSE:F) is among the traditional automakers making a big shift toward electric vehicles. With F stock trading at a forward price-earnings ratio of 6.7, it’s seriously undervalued. A dividend yield of 3.7% is another reason to consider F stock.
In terms of EV investments, Ford plans to invest $22 billion through 2025. This includes investments related to battery plants. Just to put things into perspective, Ford and SK Innovations have formed a joint venture, which will be constructing three factories.
These plants “will enable 129 gigawatt hours a year of U.S. production capacity for Ford — enough to power 1 million electric vehicles annually.” It’s also worth mentioning that Ford has a stake in Solid Power. If solid-state batteries are commercialized, Ford is likely to have secured supply from Solid Power.
It’s worth noting that Ford has 2,500 U.S. patents related to electrification technologies (battery research and electric vehicles). I will not be surprised if Ford can make significant penetration in the global EV market in the next decade.
Microvast (NASDAQ:MVST) is a designer and manufacturer of lithium-ion battery solutions (battery components and products). The company is focused on commercial vehicle electrification and therefore has a differentiated product portfolio.
For the current year, Microvast has guided for revenue growth of 35% to 40% on a year-on-year basis. As of Q3 2022, the company’s order backlog was $140.6 million. Furthermore, the company has $2.5 billion in forecasted contracted revenue through 2030.
In Q3 2022, Microvast secured $111 million in project financing for capacity expansion. The investments will be toward commercial vehicles and energy storage markets. Capital investments will ensure that revenue growth sustains in 2023 as the company targets scaling-up of U.S. business. Capacity expansion in China is also expected to be completed in Q4 2022.
Overall, MVST stock has been an underperformer. However, there are encouraging business developments. With a big addressable market in the commercial vehicle segment, I am bullish at current levels.
On the date of publication, Faisal Humayun did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Faisal Humayun is a senior research analyst with 12 years of industry experience in the field of credit research, equity research and financial modeling. Faisal has authored over 1,500 stock specific articles with focus on the technology, energy and commodities sector.
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