Two Niche Plays On EV To Put On Your Watchlist
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Innovation And Results Will Drive These Stocks Higher
It is without a doubt the EV market is a huge growth opportunity. It is also fairly clear the EV investment market got ahead of itself in 2020. Now, with prices for EV stocks trading at multi-month lows, it looks like a good time to start buying them again. With the EV car and truck markets so crowded, we thought it a good idea to expand our horizons in search of niche and specialty EV plays in a position to outperform the broader EV market. These two stocks fit that bill nicely.
Niu Technologies Electrifies Personal Transportation
Niu Technologies (NASDAQ: NIU) is in a very niche market and one we view as a high-growth market as well. The company makes a wide range of EV Smart scooters that run from high-end urban transportation all the way through incredibly versatile electrified and pedal-assisted bikes. The company just reported a blowout Q1 that points not only to growth but to accelerating growth. The Q1 take came out to 547 RMB or about $83.54 million which is up 160% from last year and beat the consensus targets by 640 basis points.
The company’s strength was driven by domestic sales in China slightly offset by weakness in the International segment. International sales fell slightly YOY due to supply and shipping constraints but are expected to rebound sharply in the second half of the year. Evidence is this lie in the total volume of scooters sold. The total volume of scooters sold jumped 273% with a sizeable portion attributed to the non-domestic business. In regard to guidance, the company is expecting to see revenue jump about 75% sequential to drive a 40% to 60% gain YOY.
Looking at the company from the profitability perspective it is profitable but missed the consensus targets by a slim margin. The company reported $0.01 in adjusted earnings and -$0.01 in GAAP earnings to miss both targets by $0.02. The miss is due to higher than expected costs but the salient fact is that margins widened and the GAAP loss narrowed to only 5.4 million RMB compared to last year’s 26.4 million.
Looking at the charts, shares of NIU appear to be bottoming and ready to spring higher. The price action over the past few trading session has been incredibly bullish and confirms support at a key level. If the market can follow through with a move above the short-term EMA we see this stock heading up to the $52 level very soon.
Lion Electric Has A Lion’s Share Of EV Mass Transportation
Lion Electric (NYSE: LEV) is a very interesting play on the EV market because it is focused on heavy-duty trucks ranging from class 5 to class 8 vehicles, busses, and mass transportations. And also because it is currently in production and receiving orders for its product. The latest is an order for 260 of its school busses from First Student, the largest student transportation provider in North America. Deliveries will start taking place as soon as July this year and will run through 2023 providing a steady base of revenue.
Shares of Lion Electric are up more than 5% in premarket action and for more than just the new order. The company’s Q1 earnings report shows revenue is up 406% from last year and well ahead of expectations. With the new order in hand and business ramping we expect to see revenue continue to grow at a triple-digit rate well into 2023 before the comps start getting really hard.
Shares of the stock are in a similar position to NIU in that they appear to be bottoming. The premarket action has prices up and off the bottom where we think bullish traders will take control. The risk is at the short-term EMA, if the price action can’t get above that level sideways and rangebound trading should be expected. If price action is able to get above the EMA we see this stock moving up to the $20 level by early summer and into the $30 range by the next earnings reporting cycle.
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