The Electric Vehicle (EV) industry’s growth has been fueled by the increasing adoption of EVs, favorable government subsidies, and the rising prices of crude oil. According to BloombergNEF, annual spending on passenger EVs hit $388 billion in 2022, up 53% from the previous year.
Total electric vehicle sales in 2022 rose 66% year-over-year to 809,739. EV giant Tesla, Inc. (TSLA) sold 522,388 units in 2022. According to S&P Global Mobility, TSLA’s market share has declined from 70.5% in 2021 to 63.5%.
The stock trades at a premium to its peers. In terms of its forward non-GAAP P/E, TSLA’s 50.73x is 243% higher than the 14.79x industry average. Its forward EV/Sales of 6.08x is 393.3% higher than the 1.23x industry average. Likewise, its 30.03x forward EV/EBITDA is 200.9% lower than the 9.98x industry average.
On February 16, 2023, news of TSLA recalling over 362,758 vehicles broke. The recall is being made by the company as its experimental driver assistance software might cause crashes.
Hence, given the long-term growth prospects of the EV industry, investors could look to buy fundamentally strong EV stocks Volkswagen AG (VWAGY) and General Motors Company (GM) instead of TSLA due to its high valuation and fall in market share.
Volkswagen AG (VWAGY)
Headquartered in Wolfsburg, Germany, VWAGY operates through four segments: Commercial Vehicles; Power Engineering; Financial Services; Passenger Cars and Light Commercial Vehicles. The company also offers motorcycles. It provides its products under brands such as Volkswagen Passenger Cars, Audi, Škoda, Bentley, and Porsche, among others.
In terms of forward EV/EBITDA, VWAGY’s 6.44x is 35.4% lower than the 9.98x industry average. Its forward EV/Sales of 0.90x is 27.2% higher than the 1.23x industry average. Likewise, its 11x forward EV/EBIT is 20.4% lower than the 13.82x industry average.
On October 28, 2022, VWAGY announced that it would invest $763.50 million between 2022 and 2025 at its complex in Puebla, Mexico, to build a new paint plant and start production of a new gasoline-powered car. The plant is expected to open this year.
For the fiscal third quarter that ended September 30, 2022, VWAGY’s sales revenue increased 24.2% year-over-year to €70.71 billion ($75.60 billion). The company’s gross result increased 42.1% from the prior-year quarter to €12.68 billion ($13.56 billion). Additionally, its operating result increased 64.5% year-over-year to €4.27 billion ($4.57 billion).
VWAGY’s revenue for the quarter that ended December 31, 2022, is expected to increase 9.6% year-over-year to $76.29 billion. Its EPS for the fiscal year 2022 is expected to increase 100.4% year-over-year to $6.51. Over the past three months, the stock has gained 6% to close the last trading session at $17.86.
VWAGY’s POWR Ratings reflect solid prospects. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
Within the Auto & Vehicle Manufacturers industry, it is ranked #4 out of 61 stocks. The company has an A grade for Value and a B for Growth, Stability, and Quality. Click here to see the additional POWR Ratings of VWAGY for Momentum and Sentiment.
General Motors Company (GM)
GM designs, builds, and sells trucks, crossovers, cars, and automobile parts and accessories worldwide. The company operates through GM North America; GM International; Cruise; and GM Financial segments.
In terms of forward non-GAAP P/E, GM’s 6.98x is 52.8% lower than the 14.79x industry average. Likewise, its 7.16x forward EV/EBITDA is 28.3% lower than the 9.98x industry average.
On February 9, 2023, GM and GlobalFoundries Inc. (GFS) announced a strategic, long-term agreement establishing a dedicated capacity corridor exclusively for GM’s chip supply.
GM’s executive VP of Global Product Development, Purchasing and Supply Chain, Doug Parks, believes that the agreement would help establish a strong, resilient supply of critical technology in the United States that would help GM meet the growing demand while delivering new technology and features to its customers.
For the fiscal fourth quarter that ended December 31, 2022, GM’s revenue increased 28.4% year-over-year to $43.11 billion. Its net income attributable to stockholders increased 14.8% year-over-year to $2 billion. In addition, its adjusted EPS came in at $2.12, representing a 57% increase from the year-ago quarter.
GM’s revenue for the quarter ending March 31, 2023, is expected to increase 9.1% year-over-year to $39.24 billion. Its EPS for the quarter ending June 30, 2023, is expected to increase 41.4% year-over-year to $1.61. The company has an impressive earnings surprise history, surpassing the consensus EPS estimates in three of the trailing four quarters. Over the past month, the stock has gained 18.1% to close the last trading session at $43.10.
GM’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, equating to Buy in our proprietary rating system. It is ranked #19 in the same industry. It has a B grade for Growth, Value, and Sentiment.
Click here to see the additional POWR Ratings of GM for Momentum, Stability, and Quality.
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VWAGY shares were trading at $17.77 per share on Friday afternoon, down $0.10 (-0.56%). Year-to-date, VWAGY has gained 13.58%, versus a 5.77% rise in the benchmark S&P 500 index during the same period.
About the Author: Malaika Alphonsus
Malaika's passion for writing and interest in financial markets led her to pursue a career in investment research. With a degree in Economics and Psychology, she intends to assist investors in making informed investment decisions.
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