Buy This, Not That: Surprising EV Plays

Shah Gilani|November 15, 2023

The rumors of the EV sector’s demise are premature…

Much is being made of Tesla having trouble selling cars… and high prices combined with high loan rates turning off consumers.

But in reality… U.S. sales have topped 1 million units this year. The global market for EVs was up 34% year to date in October.

And EV competition has been heating up. That means certain EV makers are BUYS… and others are NOT.

That’s what we’re diving into with this week’s video.

While U.S. automakers are taking a hit this year due to ongoing strike issues… there are plenty of EV makers making big strides.

Especially in China… where EV growth is exploding.

So which ones make my list of buys? And which ones should be avoided?

It’s all in my latest Buy This, Not That video.

Click on the image below to watch it.

 

TRANSCRIPT

Hi, Shah Gilani here with your weekly BTNT – as in Buy This, Not That.

A lot of you have been asking about EV automakers, so I’m going to hit them today… and sorry, I’m going to hit them probably a little hard.

First up is BYD Limited, the big Chinese EV maker, ticker BYDDF. It’s now trading at $32.

This is a real-deal company. It’s got a profit margin of 5%, makes money, makes a profit, pays you a little dividend. I like the company, I like what it does. The cars are pretty neat. The company is doing a good job of making them at a decent profit margin, and that’s all good, but I don’t know that I really want to own it.

It’s a BUY, people, if you’re speculative… only because BYD is a good company, but I don’t see the stock moving in the direction that I think it’s like, “Oh my gosh, I want to put a lot of capital in there.”

So I’m going to say it’s a BUY if you have really a long-term horizon. There are better places to put your money. So buy it only if you are very patient long term, but make sure you put a stop underneath it if you’re going to buy it. I like it only because it’s a real deal. It’s making money. It’s one of the few Chinese EV makers that’s making money. So yeah, there you go. Be gingerly with it.

Next up is XPeng, symbol is XPEV. Now, again, it’s a Chinese automaker, a speculative play, people. I’m going to say “Why not?” if you’re into a speculative play on an EV maker. And China is really going to lead the world in this. They’re already pushing harder than anybody else. They’re exporting more than anybody else. Tesla’s doing a great job when it comes to EVs, but when it comes to Chinese EV makers, they’re really pushing globally, and they’re going to do a great job.

And the prices are coming down. XPeng, at $17, is speculative. But I say “Why not?” Look, it’s got support at $13.25. It’s got resistance to $20. It’s a speculative play here. If it gets above $20, it can pop a little bit. It’s very speculative. If you want to play it, maybe play it with options a little bit better. It’s not something I’m going to put my capital into because it doesn’t have enough juice for me. But a lot of you must like it because I got a lot of questions about it. It’s speculative, people. So buy it on a speculative basis. Use a tight stop. If you get a run out of it, take some profits. If it really moves up, just move your stop up. But it’s a speculative play. It’s a BUY as a speculative play.

Next up is the big guy, Tesla.

People are willing to pay what I call the “Elon Musk premium.” The metrics on this company in terms of the price-to-every ratio – whether it’s PEG or whether it’s P/E or whatever it is – it’s crazy, but it commands the Elon Musk premium. I don’t think it’s worth it. So to me, Tesla is not a buy down. If you own it, you’ve had a great run. But it’s rolled over, people. The only reason that Tesla has been popping in the last… since really the end of last week… is because the market has popped a lot higher. And so a lot of shorts in Tesla have had to cover, and so Tesla’s looking good. Oh, coming up to its a 50-day moving average. It rolled over, people. It was scary. All right, now is the market rally mean… does that mean that Tesla is a buy? No, it doesn’t.

You got to be careful in Tesla. It’s got everything going forward. Look, the company’s great. 11%-plus profit margin… balance sheet is fine. Everything about it is fine. There’s nothing I don’t like about Tesla. It’s just that I think that the bloom is off the road, so to speak. And I think, with everybody else, with all the competition that Tesla is now facing, it’s long since lost its first-mover advantage. And I think the stock is likely to come down. It’s under pressure because it has been building, building, building factories… a lot of overhead expenses. And at the same time, it’s having to cut the prices of the cars because it’s not selling them. That’s a problem. Note to self, people: If they’re cutting and cutting – and they’ve cut three times this year – that’s a problem. That’s all the smoke that I need to see over the horizon to know that there’s probably a little fire somewhere over there.

So for me, Tesla is NOT a buy. Again, it’s hard to buck. If you want to own it, great. Just make sure you put some stops under it or take profits if you’ve owned it for a long time. It’s got resistance to $279, people. Keep an eye on $279. It’s in a downtrend. Now it’s come up to that downtrending channel marker, and that’s at $279. It’s not up there yet, but it’s going to try and get up there. That’s $279. If it gets above there, okay, then hang on to it. But if it just gets up there… or if it doesn’t get up there and turns back south… you want to make sure you have a stop in if you own it.

Okay, so Tesla… for me, NOT a buy here for sure.

Nio, another big Chinese automaker, is trading around $7.58. On paper, absolutely awful. Just everything about it. Negative profit margin. Cash flow is negative. There’s nothing I like about this on paper.

However, I will say I think it’s a BUY. It’s a speculative buy because down here it’s $7 and change. The low is $7. So you can try and buy it down here. Yes, it’s like trying to catch a falling knife, but as a speculative play… or buy some call options, maybe some $8/$9 call spreads. Don’t go out too far, as they’ll pay too much. But if you get a pop out of Nio… and by the way, you could get a pop out of Nio because 8% of the floating shares have been shorted. So you could get a little pop out of Nio. So I like it as a speculative play to the upside. Surprise. That’s what I think of Nio, symbol NIO.

Rivian is up next. Now, a lot of people ask me about Rivian. I have a couple of friends who have the Rivian trucks. I don’t think they’re cool-looking, but my friends love them. Absolutely love them, “Fast and furious,” they say, “terrific cars.” And good for them, but I don’t think that the stock is really good. It trades around $16.90 here. Again, if you want to buy, it’s down on its knees. It’s a speculative BUY.

It’s got an awful profit margin at -150%. It’s got negative free cash flow. It’s got horribly negative leveraged free cash flow. It’s just a dog. But again, the company’s selling cars, and people are saying, “Yeah, but you look around and you see them. So they’re going to be up and coming, aren’t they?” Yeah, maybe. I give the company a plus for the fact that it’s producing cars and selling them, and it’s doing a pretty good job of that.

But the company has to make money. People, it’s a long way off from making money. So it’s a speculative BUY if you want to. It’s a speculative BUY for me too. Why? Because almost 20% of the floating shares have been shorted. So 20% short of float. That means we could have a pop on any good news. So that to me is worthwhile expected. But I won’t buy the stock down here at $16 and change. But I will look at some call options. Again, $17, $18, something like that. If I can get them cheap enough, go out a few months, maybe get a pop on Rivian. You could make a bit of money there, but I’m not going to sit and hold this stock long term. If you want to own it long term because you like the cars, you like it… It’s speculative, people. That’s what you got with most of these.

Last but not least is Ford. The only reason I have Ford in here… I could talk about GM but won’t bother because it has the strike issues still. But Ford I’m going to talk about. It’s a BUY. Why? Because it’s just a shade below $10. And the reason it’s a BUY… it’s got a 6% dividend yield, or thereabouts. So that’s it. Less than $10 for Ford, okay? It’s on its knees. So if you catch it down here at the bottom and you get a rise, you can make 50% off the stock in two years. That’s not a bad return while you’re getting paid a 6% dividend yield. So yeah, it’s a BUY down here, people.

That’s it for this week. I’ll catch you guys next week. Cheers.