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The global demand for electric vehicle (EV) batteries is likely to grow multi-fold by the end of the decade. This would also imply robust growth for some of the best EV battery companies.
Notably, the EV sector has faced some near-term challenges in the form of macroeconomic headwinds, inflation, and supply chain concerns. This has translated into attractive valuations for some of the best EV stocks. Undervalued battery stocks are worth holding for the next five years.
Coming to the growth potential, the Li-ion battery demand was estimated at 700GWh in 2022. It’s expected that demand will surge to 4.7TWh by 2030. While batteries are used for multiple applications, most demand will come from EVs.
Clearly, the opportunity is huge for multiple companies to grow and create wealth. Thus, let’s discuss three names that are worth considering.
Panasonic Holdings (PCRFY)
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Panasonic Holdings (OTCMKTS:PCRFY) is an undervalued blue-chip stock that deserves a place in the core portfolio.
PCRFY trades at a forward P/E ratio of 7.8 and offers a dividend yield of 2.4%. Considering the company’s expansion plans, I am bullish on strong upside from current levels of $9.6.
Panasonic has an ambitious plan to quadruple battery capacity by fiscal year 2030. This would translate into healthy revenue, EBITDA, and cash flow upside. At the same time, the company is focusing on improving battery energy density. This can potentially help in reducing the price of EVs.
Notably, Panasonic has been supplying its batteries to Tesla (NASDAQ:TSLA). The latter has an ambitious plan to boost annual EV production to 20 million cars annually by 2030. This will benefit Panasonic in maintaining or potentially increasing market share. At the same time, Panasonic has an innovation edge which is likely to ensure growth.
Albemarle Corporation (ALB)
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Albemarle Corporation (NYSE:ALB) stock has witnessed a sharp correction that’s in-sync with the decline in lithium price. The downside is a good opportunity to accumulate ALB stock with an investment horizon of five years. With rising demand for EVs, lithium shortage is likely. Yet, the outlook for the metal is positive through the decade.
From a valuation perspective, ALB stock trades at a forward P/E ratio of 5.4. Further, the stock offers a dividend yield of 1.33%. Of course, pain is likely in the form of EBITDA margin contraction and lower cash flows. However, Albemarle has a strong balance sheet to navigate the challenging times.
Additionally, Albemarle has initiated cost cutting measures and rephasing of growth investments. Earlier, Albemarle has guided for increase of lithium conversion
The Latest Buzz on Battery Stocks
Bright Prospects for Albemarle Corporation (ALB)
Albemarle Corporation (NYSE: ALB) stands at the intersection of booming demand for electric vehicles and the production of lithium, setting the stage for a potential uptick in stock value. The company’s lithium capacity, poised to grow from 200ktpa in 2022 to 600ktpa by 2027, is worthy of note despite being undervalued in current market evaluations.
Anticipate a positive turn in ALB stock once pessimistic market sentiments surrounding lithium fade, paving the way for a vigorous rally.
QuantumScape (QS)
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QuantumScape (NYSE:QS) is another compelling narrative in the realm of battery stocks. While QS stock carries a high degree of risk, it presents an opportunity for substantial returns. Amid a year-long horizontal stock movement, the company’s recent business strides hint at an imminent upturn.
The initiation of EV battery prototype shipments to automotive clients marks a pivotal development, cementing QuantumScape’s EV battery technology credibility. Furthermore, the company’s backing by Volkswagen (OTCMKTS:VWAGY) and its contractual agreements with six automotive original equipment manufacturers add credence to its trajectory.
While QuantumScape isn’t expected to deliver production-ready prototypes to clients before 2025, the stock is poised to surge upon favorable validation results from automakers.