A February study by S&P Global Platts Analytics found that “Global light electric vehicle sales hit an all-time high of 6.3 million units in 2021, up 102% year on year, and this number is expected to rise to 26. 8 million units by 2030.”
The updated forecast for 2030 is 23% higher than a previous forecast published in June 2021.
Platts Analytics Low Carbon Transport Analyst David Capati said in a statement that the forecast was raised due to several factors, including faster-than-expected consumer adoption, increased policy support and pressure from governments.
When an industry is primed for medium to long-term growth, companies that supply that industry can also make significant profits.
More deals with EV makers
Luminar, which makes sensors for autonomous vehicles with the aim of increasing safety, said last year that its lidar sensors would be built into electric vehicles from SAIC Motor, China’s largest automaker.
Luminar also has deals with Volvo, Daimler Truck AG and Intel’s (NASDAQ:INTC) Mobileye, among others.
On August 8, Luminar reported a second quarter loss of $0.18 per share on revenue of $9.9 million. Sales exceeded the company’s expectations, representing a 57% year-over-year profit and a 45% sequential profit.
The company raised its revenue outlook for the full year 2022 to a range of $40 million to $45 million, up from earlier expectations of $40 million.
Luminar went public in December 2020 and merged with special acquisition company Gores Metropoulos. It’s not at all unusual to see new businesses in fast-paced businesses emphasizing growth rather than profitability.
Yes, that has echoes of the dotcom boom of the late 1990s, when investors piled up in all sorts of unprofitable Internet companies. However, there is also some validity to the idea of investing in ramping up operations for ultimate profitability.
The stock climbed 46% in heavy volume in the week of the report, pointing to strong institutional buying. It’s slowed down a bit since the week ending August 19, but that’s very common as some investors take profits after a big run-up.
Chipmaker Wolfspeed is also racing ahead in terms of exposure to the EV industry. The stock shot up 31% in July and rose another 33% in August.
Wolfspeed increases by 32%
Wolfspeed is a market leader in silicon carbide and gallium nitride (GaN) technologies. The product lines include silicon carbide and GaN materials, power equipment and radio frequency devices for a variety of applications, including electric vehicles, fast charging, 5G, renewable energy and storage, as well as aerospace and defense.
It rose nearly 32% in one day, Aug. 18, following the company’s fourth-quarter report that handily crushed positions.
Wolfspeed’s revenue grew 56.7% year-over-year to $228.5 million, surpassing estimates by approximately $21 million. Despite reporting a loss of $0.02 per share, that was also a blow. Analysts had expected a loss of $0.10 per share.
According to MarketBeat earnings datait marked the fifth straight quarter that Wolfspeed beat lower estimates.
The company also said it expects revenue in the current quarter of between $232.5 million and $247.5 million, also above forecasts.
Analysts expect Wolfspeed to turn profitable in fiscal year 2023, with earnings of $0.15 per share. In fiscal 2024, earnings are expected to rise to $1.74 per share.
The stock has been correcting since November, essentially along with the S&P 500 and Nasdaq Composite. But unlike many stocks, as well as the broader indices, Wolfspeed has shown price gains on an annualized basis, as well as on a year-over-year basis.
It is clear that companies involved in high-potential businesses, such as the EV industry, appear well-positioned to make further gains in the coming years. Investors sometimes need to exercise a little patience if they plan to hold one of these stocks for an extended period of time in hopes of making monster profits.
It’s worth noting that even leading stocks like Amazon (NASDAQ: AMZN) plodded through times of correction before recovering to become great leaders. There’s no guarantee of a stock’s future potential, of course, but sometimes when you’re confident in a stock, patience may be all it takes.