With the electric-vehicle revolution rapidly continuing, investors should look for undervalued battery stocks to buy. After all, the tens of millions of EVs that will be produced in the coming years will all need batteries. Or, as the prestigious consulting firm McKinsey put it last October “As the auto market embraces electric vehicles, battery demand is soaring.”
Meanwhile, it’s not easy to produce EV batteries, as it’s difficult to secure the materials needed to make the batteries. Therefore, the companies that are already managing to produce significant number of EV batteries have accomplished a meaningful feat and have a significant competitive advantage over those that are still trying to enter the sector.
Further, of course it’s worth buying the stocks of battery makers whose products are meaningfully superior to those that are already on the market.
Here are three of the most undervalued battery stocks to buy in June:
Proterra (NASDAQ:PTRA) has entered a unique niche within the battery sector. Specifically, the company is specializing in making batteries “for heavy-duty electric vehicles.” Given the many companies that are looking to buy more EVs in order to please consumers and/or comply with government regulations, this niche should be very lucrative over the long-term.
Moreover, Proterra says that its batteries for large, commercial EVs are superior to competing products. According to the company, its batteries “have industry-leading energy density for maximum range, a flexible design to fit within a wide variety of vehicles, and a ruggedized commercial grade housing to withstand harsh environments.”
Backing up Proterra’s assertions, the revenue of its Proterra Powered and Energy unit, which includes its battery business, jumped 49% last quarter versus the same period a year earlier to $35 million.
Proterra’s trailing price-sales ratio is a tiny 0.8, making it one of the most affordable battery stocks to buy.
In addition to batteries Proterra also sells electric buses and EV chargers. Analysts, on average, expect the company’s top line to jump to $473 million this year versus $309 million last year.
Solid Power (SLDP)
Solid Power (NASDAQ:SLDP) has developed solid-state EV batteries. According to the company, its batteries contain more energy and are safer than the lithium-ion EV batteries that are widely used today. Moreover, SLDP reports that its batteries are safer and will last longer than their lithium-ion counterparts.
The company is already producing the specialized powder that will serve as the electrolyte of its solid-state batteries. In a year, SLDP plans to produce 2 to 3 metric tons of powder per month, and it intends to sell its excess powder to other battery makers and automakers.
Moreover, SLDP plans to start delivering battery cells to its partners by December.
Somewhat validating SLDP’s technology, one of its partners, BMW (OTCMKTS:BMWYY), is researching the battery maker’s technology and plans to build batteries based on SLDP’s system at its own plants. What’s more, BMW intends to start testing the batteries in EVs in 2023, suggesting that the batteries’ development may be nearing completion.
Further, BMW and Ford (NYSE:F) have both invested significant amounts of money in SLDP.
Solid Power’s market capitalization is just $376 million, which is dozens if not hundreds of times below its long-term potential.
Panasonic (OTCMKTS:PCRFY) operates one EV battery factory in the U.S. in partnership with Tesla (NASDAQ:TSLA). The company is also currently building another factory and reportedly has plans to launch a third.
As a result, I believe that the conglomerate is poised to benefit from huge increases in the revenue generated by its EV batteries in the U.S. over the longer term.
Also noteworthy is that Panasonic plans to increase the energy density of its EV batteries by 25% in 2030, likely giving them an important advantage over many competing products. And of course, Panasonic’s partnership with Tesla should become more and more lucrative as the years go by.
Analysts, on average, expect the battery maker’s EPS to jump to $1.35 next year from $1.10 this year.
Based on the mean 2024 EPS estimate, the shares are changing hands for just 8.2 times the company’s forward earnings.
On the date of publication, Larry Ramer 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.