We recently compiled a list of the 11 Best EV Stocks To Buy For The Long Term. In this article, we are going to take a look at where Canoo Inc. (NASDAQ:GOEV) stands against the other EV stocks to buy for the long term.
The Challenges of EV Adoption and the Promise of Solid-State Batteries
On August 30, Mark Fields, former Ford CEO and President joined CNBC’s ‘Squawk Box’ to discuss the challenges facing electric vehicle (EV) adoption. Fields pointed out that early enthusiasm for EVs was driven by automakers and government regulations, but mass adoption is proving more difficult. Consumers are hesitant due to several factors including the high cost of EVs, the lack of visible and convenient charging infrastructure, and the slow charging times compared to gas refueling.
Fields suggested that automakers need to offer more affordable EVs and expand hybrid offerings while working towards breakthroughs in battery technology, especially solid-state batteries. These batteries could eventually reduce charging times to match the convenience of filling up at a gas station.
Fields commended his former company’s strategy as it involves focusing on hybrid models to ease consumers into EV technology without the range anxiety that comes with current models. He noted that automakers are also facing financial challenges in the EV space, as shown by his former company’s recent writedowns.
He emphasized that while automakers are working on delivering low-cost EVs, the real game-changer will be the development of solid-state batteries, which could significantly improve charging times and consumer convenience.
Exploring Three Scenarios for the Future of EVs
Despite the challenges, the EV industry seems inevitable and is poised to grow over the next few decades. We discussed the International Energy Agency’s (IEA) EV outlook in our article about the best EV stocks according to short sellers. Here is an excerpt from it:
“The IEA’s Global EV Outlook 2024 examined the potential paths to electrifying road transport by 2035. The report presents three scenarios: the Stated Policies Scenario (STEPS), the Announced Pledges Scenario (APS), and the Net Zero Emissions by 2050 Scenario (NZE). The STEPS considers current policies and market trends, the APS assumes that all government pledges will be fully implemented on time, and the NZE outlines a pathway to achieve net zero CO2 emissions by 2050.
The projections show that the global EV fleet could grow significantly by 2035. Under the STEPS, the number of EVs is expected to increase from less than 45 million in 2023 to 525 million by 2035. In the APS, this number could reach 585 million, while the NZE Scenario projects a more ambitious growth to 790 million EVs by 2035.
The report also discussed the growth of electric light-duty vehicles (LDVs), buses, and two/three-wheelers (2/3Ws). LDVs, which include passenger cars and light commercial vehicles, are expected to remain the largest segment of the EV market. Electric buses and 2/3Ws are also projected to see significant growth, especially in regions like China and India, where policy support is strong. However, achieving full electrification of these segments will require continued policy support and technological advancements.”
Moreover, governments worldwide are pushing for increased EV production due to environmental concerns, with the U.S. making significant moves in this direction. On July 11, the Department of Energy (DOE) announced $1.7 billion in grants to support the conversion of 11 auto manufacturing plants in eight states to produce electric vehicles and their components. This is part of President Biden’s “Investing in America” initiative, which is aimed at protecting union jobs and giving a boost to EV manufacturing.
The program is funded by the Inflation Reduction Act and will preserve over 15,000 union jobs and create nearly 3,000 new ones, which will support the production of EV components like batteries and electric motorcycle parts.
Our Methodology
For this article, we used screeners and ETFs to identify 22 EV manufacturers with a market cap of above $50 million and narrowed our list to 11 stocks with the highest average analyst price target upside, as of September 11. We took analyst comments mostly from The Fly and TipRanks. We also added the hedge fund sentiment around each stock which was taken from Insider Monkey’s database of over 900 elite hedge funds.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A fleet of electric and lifestyle delivery vehicles grouped together in a line.
Canoo Inc. (NASDAQ:GOEV)
Average Analyst Price Target Upside as of September 11: 268.85%
Number of Hedge Fund Holders: 5
Canoo Inc. (NASDAQ:GOEV) is an innovative force in the EV sector, on the edge of transforming itself with cutting-edge designs and technologies. The company’s focus on versatility and efficiency is evident through its multi-purpose platform (MPP), which integrates crucial components like motors and battery modules into a single, adaptable structure.
The platform allows the company to offer a wide range of vehicles tailored to different needs, including the Lifestyle Vehicle for consumers, the Delivery Vehicle for commercial use, and an all-electric pickup truck.
Investments in manufacturing infrastructure further position it for growth. The company’s first established battery module manufacturing facility is in Pryor, Oklahoma, which is powered largely by renewable energy sources such as hydro and wind power.
The commitment to sustainability was complemented by the acquisition of advanced manufacturing assets at its Oklahoma City site. The assets include state-of-the-art robotics and processing equipment, which pushes it forward to scale production efficiently while maintaining high standards of quality.
Its strategic partnerships solidify its market reach and operational capabilities. In 2023, the company entered an agreement with GCC Olayan, a prominent distributor in Saudi Arabia. The partnership grants GCC Olayan exclusive rights to sell, service, and distribute the company’s vehicles in the region and plans to establish a joint venture for local assembly.
The move aligns with Saudi Arabia’s Vision 2030 initiative, which focuses on sustainable mobility solutions. Additionally, Canoo’s (NASDAQ:GOEV) vehicles are set to be part of a pilot program by Red Sea Global, where they will be used in a high-profile tourism project. It points to the practical applications and versatility of its EVs in various environments.
Furthermore, the company’s recent deal with Go2 Delivery highlights the growing demand for its commercial vehicles. Go2 Delivery has committed to purchasing five fully-electric vans, with an option for up to 85 more. The integration of the company’s Class 1 Lifestyle Delivery Vehicle 130 into Go2’s fleet points to the company’s appeal in the commercial sector.
Despite some recent adjustments to production timelines, on August 15, H.C. Wainwright lowered the price target on Canoo to $4 from $7 but kept a Buy rating on the shares post the Q2 report. As per the firm, the key driver for the company’s future stock performance remains vehicle deliveries. The company’s focus on expanding its production capacity and forging meaningful partnerships suggests that it is on a path that could lead to significant growth as it moves towards ramping up production and increasing its market presence.
Furthermore, 6 analysts have a consensus Buy rating on the stock. The average price target of $4.50 represents an upside of 268.85% to the stock’s current price, as of September 11. It tops our list of the best EV stocks to buy for the long term. However, it is important to note that the company is having a few financial troubles such as high cash burn, but analysts remain optimistic due to its recent cost management moves and future revenue growth. On the other hand, the bears believe that the company needs substantial funding to continue its operations with ease.
According to the Insider Monkey’s database, Canoo (NASDAQ:GOEV) was a part of 5 hedge fund managers’ portfolios, with stakes worth $212,000 as of the second quarter. As of June 30, Millennium Management holds the highest stake in the stock, worth $80,486.
Overall GOEV ranks 1st on our list of the best EV stocks to buy for the long term. While we acknowledge the potential of GOEV as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than GOEV but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.