The market seems to have pumped the brakes on the electric vehicle (EV) boom, which was in high gear in 2021 and 2022. With investors more euphoric over hotter emerging technologies (it’s hard to name anything hotter than generative AI these days!), the broader basket of top EV plays has been a sagging trade of late. With potential economic headwinds in 2024 entering into the equation, demand for these undervalued EV stocks may stay in the backseat for a while.
Even the EV pioneer Tesla (NASDAQ:TSLA) has lost its way in recent years, despite boasting impressive AI capabilities in its autopilot capabilities. Of course, self-driving and autopilot are nowhere near perfect at this point in the game. However, I still view some of the top EV plays as also some of the most intriguing AV (autonomous vehicle) plays to bet on over the next decade.
Either way, these undervalued EV stocks are out right now, beckoning dip-buyers with recent weakness in their share prices.
Tesla stock’s slump has carried over 2024, with shares now down over 13% year-to-date (just over two weeks). Now down around 47% from its all-time highs hit back in late 2021, some may wonder if the EV giant is still worthy of the company of the Magnificent Seven group.
Personally, I think it’s still magnificent in its own way, especially if we gain more clarity on the future of AVs and our roads. For now, though, I can’t say I’d be willing to catch the falling knife with all the negative momentum behind it and the potential for EV demand to wane in an economic slump. Of course, acting as a lone buyer in a significant stock slump could accompany the greatest potential rewards.
For now, Tesla stock’s technical pattern is not a pretty one. If you view the growing number of EV rivals as a threat to the firm’s moat, Tesla’s recent slump may be completely warranted.
Sure, a potential leadership in the emerging AV scene can save the stock. But until Tesla can show off its AV and AI muscles, the negative trajectory could remain intact, even if the fancy Cybertruck sells a bit better than expectations.
The number-one reason to stick with Tesla stock, though, has to be faith in Elon Musk. It’s Musk’s genius that I believe makes Tesla one of the best value propositions in the EV space, even amid mounting headwinds.
Rivian (NASDAQ:RIVN) is an EV trucking play that crashed violently since debuting on the public markets back in 2021. The stock has shed more than 87% from its peak and seems stuck in no man’s land. The company’s latest quarter saw deliveries fall well short of expectations.
Only 13,972 deliveries were made from October through December, just a hair shy of the 14,000 delivery estimate. The stock has sunk anyway despite posting deliveries that were “in line” with expectations. Looking ahead, things probably won’t get any better as Tesla’s Cybertruck begins to pick up some traction in the electric truck market. For many investors, Rivian seems to be driving into terrain that’s only getting rockier.
That said, the stock is in the ditch right now. With estimates now relatively muted, it may not take much to drag the ailing EV play out of the mud. While I prefer Rivian’s look to the Cybertruck, looks can only go so far, however. As such, investors should stay cautious going into 2024 as the electric trucking scene heats up.
General Motors (GM)
Our last option in undervalued EV stocks is General Motors’ (NYSE:GM), whose shift to electric hasn’t been very profitable for investors. The stock now down more than 45% from its 2021 all-time high. Indeed, going electric is no easy feat, especially in an economy that appears destined for a recession. In any case, GM is on the right track and trades at a valuation that’s nothing short of compelling for value investors seeking entry into the EV scene.
At 0.29 times price-to-sales and 4.5 times forward price-to-earnings, the value proposition seems too good to be true. If a recession ends up being mild, I wouldn’t count GM out as it continues riding on the path of its EV strategy.
GM’s foray into autonomous ridesharing with Cruise has been a vast disappointment, with the firm recently pulling the brakes on the business by laying off 24% of its talent. Despite the roadblock, CEO Mary Barra sees a future with Cruise, noting that her firm is “focused on righting the ship.”
It will be extremely hard to right the ship, in my opinion, especially with such a horrendous early (and perhaps premature) start out of the gate.
On the date of publication, Joey Frenette did not hold (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.