Today’s episode of Full Court Finance at Zacks digs into the market after the August CPI release and ahead of the Fed’s big September meeting next week. The Nasdaq and the S&P 500 climbed on Thursday to inch back above their 50-day moving averages, while market volatility dropped back near its June lows.
With this backdrop, investors might decide it is time to take a chance on some home run-style stocks from the renewable energy and electric vehicle industries.
The three stocks we break down today are Rivian Automotive (RIVN), Altus Power (AMPS), and Livent (LTHM), looking into why each stock trading for under $25 a share has the potential for substantial upside.
First up is recently-rebounding U.S.-based EV maker Rivian Automotive, Inc. (RIVN), which is currently trading for around $24 a share. RIVN is ramping up production and cutting costs, while rolling out unique offerings compared to Tesla (TSLA), Volkswagen, and many other EV companies.
Rivian’s EV pickup truck, the R1T, is sleek but far less futuristic than the Cybertruck (which still isn’t on the road) and the R1S SUV is a true sports utility vehicle compared to anything Tesla makes.
Rivian also makes commercial EV vans, and its partnership with Amazon (a big investor) is set to see it bring 100K electric delivery vehicles to the road by 2030. And in the first half of 2023, Rivian’s R1T came in fourth in terms of top-selling EVs in the U.S., behind only Tesla’s Model Y and Model 3 and the Chevrolet Bolt.
Global electric vehicle sales soared over 65% in 2022 even as total new car sales dropped by 1%. More importantly, the industry is projected to expand from 4% of the market in 2020 to 50% of new car sales by 2035.
Rivian’s revenue is projected to skyrocket 161% in 2023 and another 57% in 2024 to reach $6.82 billion next year—up from $55 million in FY21. RIVN is also projected to cut its adjusted loss from -$6.34 a share last year to -$2.92 a share in FY24.
Rivian spiked in its early trading days (November 2021) to around $170 a share only to tumble alongside most of the market for over a year. RIVN is up around 30% in 2023, including a big jump since late June. RIVN stock is also back above some key technical levels and trading at a roughly 50% discount to Tesla at 3.6X forward 12-month sales.
Next up is a company that helps investors gain exposure to the growing use of solar energy and battery storage at commercial and industrial buildings, warehouses, and beyond. Altus Power (AMPS) is an electrification company and a solar energy stock trading for around $6 a share. Altus Power originates, develops, owns, and operates locally-sited solar generation, energy storage, and charging infrastructure across the U.S.
Altus is set to grow as a larger chunk of the commercial real estate market embraces on-site solar energy and storage. Altus is projected to see its adjusted earnings slide in FY23, after they slipped during the first two quarters. But Wall Street is forward looking and estimates for Q3 and Q4 appear solid.
AMPS is then set to surge from $0.06 a share to $0.14 a share next year. Altus is projected to grow its revenue by roughly 70% and 53%, respectively during this stretch.
AMPS stock has jumped 40% since early May. Altus is currently trading between its 200-day and 50-day moving averages, and it completed the golden cross, where the shorted dated moving average crosses above the long-term trend at the end of August.
At around $6 a share, Altus trades roughly 50% below its 52-week highs and 78% beneath its average Zacks price target. Plus, six of the seven brokerage recommendations Zacks has are “Strong Buys.”
Last up is high-quality finished lithium compound producer Livent (LTHM). Rechargeable lithium-ion batteries are now crucial cogs in the next wave of energy and transportation, from EVs and beyond, well as other electronics and more. Lithium prices have come down from their November 2022 highs to around where they were in the fall of 2021.
Despite some possible boom and bust cycles, lithium demand is projected to outrun supply for years to come. Zacks estimates call for Livent’s revenue to climb 32% in FY23 to $1.1 billion to help boost its adjusted earnings by 54%.
Its adjusted earnings are then projected to jump 20% higher on 27% stronger sales in 2024. All of this comes on the back of Livent’s massive growth in 2022 and 2021.
Livent stock is up 115% in the last three years, but it has chopped around since the early part of 2021. Livent trades 55% under its average Zacks price target and 42% below its own highs. LTHM is also at oversold RSI levels.
Livent stock trades at 8.1X forward 12-month earnings to mark a solid discount vs. its Zacks sector’s 12.6X and 95% value vs. its own peaks. In fact, Livent is trading around its lowest levels since it went public. Investors should also note Livent said its proposed merger with Allkem is moving forward toward a targeted year-end close.
The deal (an all-stock merger of equals) announced back in May will create the world’s third-largest producer of the metal used to make EV batteries and more. Livent shareholders will own approximately 44% of the new public company.
(Disclosure: Ben Rains own RIVN, AMPS, and LTHM in Zacks Alternative Energy Innovators service)
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This article originally appeared on Zacks
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