Analysts Are Upgrading EV Stocks Despite the Downtrend

Rachel Curry - Author
By

May 31 2022, Published 10:50 a.m. ET

Shares for the electric vehicle iShares Self-Driving EV and Tech ETF are down 24.29 percent YTD on May 31, which reflects the state of the EV industry. Despite this downward trend, analysts are upgrading a swath of EV stocks.

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Here’s what’s causing the push for a brighter EV outlook despite a looming recession. What does the future hold for EV stocks, according to experts?

Rivian, NIO, and Tesla got an upgrade.

After the Memorial Day weekend and a brief break for stocks, analysts are placing emphasis on a trio of EV stocks — Rivian Automotive Inc. (RIVN), Tesla Inc. (TSLA), and Nio Inc. (NIO).

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As interest rates rise, hyper-inflation holds firm, and a recession looms, individual industries still have the chance to thrive in difficult conditions. EVs have an advantage as the global oil markets face ongoing obstacles, potentially positioning them for success as supply chain constraints and pandemic-era regulations loosen in the U.S. and abroad.

Here's where the experts stand on EV stock upgrades.

Japanese banking holding company Mizuho maintains its stature that Tesla stock is a buy. The move comes despite lagging production in Tesla’s Shanghai plant and the company’s legal difficulties that have pushed it off of the S&P 500 ESG (environmental, social, and governance) index.

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Mizuhu says these headwinds are temporary and the company’s performance could improve by September or December 2022. A rebound is possible with "improved supply chains and Berlin ramping,” the firm adds.

Chinese EV company NIO could also rise as China eases COVID-19 restrictions, Morgan Stanley says.

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“The stock has traded off lately partially due to lingering concerns over the suppressed sales amid the lockdown in Shanghai, which made up more than 15 percent of the company’s sales in 2021,” a Morgan Stanley representative wrote in a note. In short, the firm says it’s likely up from here.

Rivian has been marked as a liability after Amazon’s investment in the EV company caused major earnings losses for the e-commerce giant. AMZN stock fell about 15 percent in one fell swoop on April 29 following a subpar earnings report for which the company blamed Rivian. Despite that, Mizuho says Rivian’s H2 of 2022 will be much brighter.

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Should you invest in EV stocks amid the upgrades?

Stocks of EV companies that are in the early production and distribution stages are difficult to assess due to a lack of profit-rearing historical data. RIVN is down nearly 70 percent YTD while the more-established TSLA stock is down more than 37 percent. NIO, the newest of the trio, is down nearly half in the same time frame.

Despite these variations, one thing is clear. Experts predict upsides for all three of these EV stocks. With increased scrutiny on fuel-based transportation and its impact on climate change, the industry’s place in the future is all but secure. Investors should still be mindful of an upcoming recession, which may act differently than anticipated in the wake of unprecedented capital stimulus into the U.S. economy.

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