Polestar (PSNY): Asset-Light EV Manufacturer Targets Positive Margins Amid Steady Growth - InvestingChannel

Polestar (PSNY): Asset-Light EV Manufacturer Targets Positive Margins Amid Steady Growth

We recently published a list of 8 Best EV Penny Stocks to Invest in Now. In this article, we are going to take a look at where Polestar (NASDAQ:PSNY) stands against other best EV penny stocks to invest in now.

According to an S&P Global report on October 21, the automotive industry faces challenges in sustaining EV sales after initial adoption by early technology enthusiasts. Analysts indicate that higher EV prices, typically $10,000 to $15,000 more than comparable internal combustion engine (ICE) models, have hindered broader consumer purchases.

While some automakers have recently lowered prices, demand remains closely tied to subsidies. The report highlighted that demand often declines in markets where subsidies and incentives decrease. In the U.S., states like New Jersey continue to offer incentives, such as up to $4,000 for new battery EVs and $250 for EV chargers, to help close the price gap.

Another challenge is that range anxiety persists, especially in colder weather, which can reduce battery efficiency by about 25% when temperatures drop below 40°F, according to Consumer Reports. Additional challenges include insufficient charging infrastructure, longer charging times compared to refueling ICE vehicles, and high repair costs for components like battery packs, which can increase insurance premiums.

Nevertheless, experts believe that EVs are eventually going to take over the ICE market, as mentioned in our 13 Most Promising EV Stocks to Buy According to Hedge Funds. Here is an excerpt from the article:

“In a CNBC interview, Young Liu, Chairman of Hon Hai Technology Group said that the future of the automotive industry will be dominated by electric vehicles, with hybrids playing a limited role due to advancements in battery technology. He made a note of current challenges such as charging times and range anxiety, but expects improvements in battery systems will eliminate the need for hybrids.”

Read Also: 7 Best Delivery Stocks To Invest In Now and 10 High Growth Non-Tech Stocks That Are Profitable in 2024.

Adapting to Change: The Future of Electric Mobility

At the Fortune Most Powerful Women Summit, GM CEO Mary Barra highlighted the competitive pressure from China’s growing EV market. She noted significant changes in China as the country embraces hybrids and EVs, with over a hundred local companies offering low-cost options, creating a challenging pricing environment.

Nevertheless, Barra told Fortune that she remains optimistic about the U.S. EV future and noted that improvements in affordability and charging infrastructure will encourage more consumers to adopt EVs. Her company’s collaboration with Tesla to expand charging access and partnerships with travel centers have positioned the company as the second-best-selling EV maker in the U.S., with a 60% increase in EV deliveries in the last quarter. Barra emphasized the need for attractive, affordable vehicles and ongoing enhancements to charging networks to drive future growth.

Our Methodology

For this article, we identified over 30 companies with operations in the EV industry that are trading below $5 as of October 22. We narrowed our list to 8 stocks most widely held by institutional investors. We skipped the stocks that were trading either below $1 or had major headwinds in sight. The best EV penny stocks are listed in ascending order of their hedge funds sentiment, taken from Insider Monkey’s database of 912 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).

Polestar (PSNY): Asset-Light EV Manufacturer Targets Positive Margins Amid Steady Growth A pristine electric vehicle parked in front of a modern Gothenburg skyline.

Polestar Automotive Holding UK PLC (NASDAQ:PSNY)

Number of Hedge Fund Holders: 12

Share Price: $1.32

Polestar Automotive Holding UK PLC (NASDAQ:PSNY) is a Swedish electric vehicle manufacturer that operates using an “asset-light” model and uses production facilities from Volvo and Geely in countries like China, the U.S., and South Korea. Originally a motorsport team named Flash Engineering, it later became Polestar Racing, Volvo’s performance partner, before Volvo acquired it in 2015 and refocused it on electric vehicles.

Its lineup includes the hybrid Polestar 1, limited to 1,500 units and discontinued in 2022, and fully electric models Polestar 2, 3, and 4. In August, Polestar began production of the Polestar 3 SUV in South Carolina to serve both U.S. and European markets, a strategic move to mitigate tariffs on Chinese-made vehicles. It is also the first model from the brand to be manufactured on two continents.

In Q3, Polestar (NASDAQ:PSNY) delivered around 11,900 vehicles, bringing the total for the year to 32,300. The company aims to achieve a positive gross profit margin by Q4 while expecting revenue to remain similar to 2023. The company plans to provide a strategic business update on January 16, 2025. To focus on its long-term objectives and yearly performance, it has opted for a more limited Q3 report. The company takes the 4th spot on our list of best EV penny stocks.

Overall, PSNY ranks 4th on our list of best EV penny stocks to invest in now. While we acknowledge the potential of PSNY 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 PSNY but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.

Disclosure: None. This article is originally published at Insider Monkey.

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