With the world taking huge strides in the transition to electric vehicles, there has been a spike in demand for EVs, as well as the batteries that power them and the materials needed to build those batteries. Prior to the latest bear market, this demand led to a spike in the value of EV-related stocks, including EV battery stocks. However, 2022 was a different story. Supply chain issues coupled with a mass exodus from growth stocks hit these equities hard.
But the EV revolution is far from over, and the bull run in the sector will resume as investors’ appetite for risk returns. Those who invest in stocks related to EV batteries now all but ensure a first-mover advantage and solid long-term returns. If you don’t believe me, consider that, according to McKinsey, battery demand is expected to grow by about 30% a year through 2030, with the vast majority of that demand driven by EVs.
Below are three EV battery stocks for investors to consider.
| LAC | Lithium Americas | $20.54 |
| GM | General Motors | $34.62 |
| HON | Honeywell | $189.14 |
Lithium Americas (LAC)
My top choice among EV battery stocks is Lithium Americas (NYSE:LAC). You can’t build EV batteries without lithium, and the metal is in short supply, at least for now.
Lithium Americas’ recently approved Thacker Pass project in Nevada could soon become a cash machine for the company. Earlier this year, General Motors (NYSE:GM) announced a $650 million investment to help develop the Thacker Pass project in a bid to secure lithium for its EV production.
Lithium Americas expects the Thacker Patch to produce 40,000 tons of lithium carbonate in the second half of 2026, with a goal of producing 80,000 tons a year after that. Once the project is underway, the profits will start rolling in.
So far this year, the stock is up 8.5%, although it has struggled this month amid a broader market downturn. Trading around $2o a share today, LAC looks attractively priced.
PI Financial analyst Justin Stevens, who has a “buy” rating on the stock, thinks shares could roughly double from here based on his price target of $40. According to Stevens, LAC offers “an attractive opportunity” to invest in the production of battery-grade lithium chemical production in the United States.
General Motors (GM)
General Motors (NYSE:GM) is an American icon in the automotive industry with a loyal customer base. The company pays a solid dividend of 36 cents per share for a return of just over 1%. However, shares are down 18% over the past year, and they have underperformed the S&P 500 over the past five years, gaining less than 10%.
This could change, though, as the company transforms itself into an EV leader. GM plans to spend $35 billion through 2025 to develop electric and autonomous vehicles. The company already has EV models on the roads in the U.S. and China, with many more to come, including a full-size pickup truck and a Hummer EV.
Of course, this is an article about the best EV battery stocks to own, but GM fits the bill here too. While GM plans to boost EV production in the second half of the year, it has gotten off to a relatively slow start compared to some of its peers. This has been due in part to the company not being able to ramp up its battery production as quickly as hoped.
However, the company has been investing heavily in battery plants in multiple states, with CEO Mary Barra calling 2023 the “breakout year” for the company’s Ultium platform, which aims to reduce the cost of batteries while increasing efficiency. GM’s Ohio battery plant is expected to be at full capacity by the end of the year, adding about 20% a quarter to production. And the company announced a $7 billion investment to expand battery production in Michigan.
GM may not be off to the fastest start in the EV race, but the company is almost certain to be one of the biggest winners.
Honeywell (HON)
Honeywell (NASDAQ:HON) is a diversified technology and manufacturing company that serves a variety of industries, including aerospace, defense and building materials. It is also at the forefront of quantum computing. And as InvestorPlace contributor Faizan Farooque noted recently, the company is making a name for itself in the battery industry.
But that’s not all. At the end of last year, Honeywell announced a partnership with Nexceris. The firms are working on sensors meant to improve the safety of EV batteries by detecting gases produced from high temperatures in lithium-ion batteries. These sensors are vital to helping EV manufacturers meet battery fire safety requirements.
Honeywell has a stable balance sheet and enjoys strong free cash flow, generating $5.3 billion in 2022. The stock is down around 9% over the past year. However, analysts rate it a “buy” with an average price target of $218.54, which is more than 15% above the current share price. Plus, the company pays a quarterly dividend of $1.03 per share for a yield of 2.1%.
On the date of publication, Vandita Jadeja did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.