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Morgan Stanley storms into the EV room; Offers 2 stocks for sale
We live in interesting times indeed – and in many ways this is a good thing. Take the automotive industry, for example. Technology is changing rapidly and when it comes along the way we drive will change dramatically. In 2030 our concept of the “car” will probably no longer be recognizable for drivers from 1980 onwards. The biggest changes come from power systems and artificial intelligence. AI will bring autonomous technology into our cars and make self-driving vehicles a reality. But the changes to the power systems will hit us first. In fact, EV vehicles are already on our roads and electric vehicle (EV) companies are growing rapidly. There are currently several avenues to potential success in the EV market. Companies are working to position themselves as leaders in battery technology or electric powertrains, or to maximize their range and performance per charge. It's a factual industry environment that offers investors both opportunity and excitement. Smart investors will look for companies that are able to meet scaling requirements once they have settled on marketable models. Investment firm Morgan Stanley has been watching the EV industry looking for innovative new design and manufacturing companies to position themselves for profit as they go to market. The company's automotive analyst Adam Jonas selected two stocks that investors should seriously consider: “When examining the start-up landscape for EVs and batteries, we prioritize highly differentiated technologies and / or business models with a scaling path appropriate to risk. “When opening the TipRanks database, we pulled the details of both picks from Jonas to see if they would fit your portfolio well. Fisker (FSR) For starters, Fisker is based in Southern California, the epicenter of so many of our breakthrough technology industries. Fisker's focus is on solid-state battery technology, a growing alternative to the lithium-ion batteries on which most electric vehicles depend. Solid-state batteries are more expensive than older lithium-based systems, but they are safer and offer higher energy densities. Fisker was busy patenting his move to solid-state batteries, a solid strategy to ensure his advances in the field. For electric vehicles, solid-state batteries offer faster charging times, longer range per charge, and potentially lower battery weight – all important factors in vehicle performance. Every auto company needs a flagship, and Fisker has the Ocean – a mid-price EV SUV with a long-range propulsion system (up to 300 miles). The vehicle has a stylish design and room-mounted solar panels to complement the charging system and is scheduled to go into production in 2022. The stylish design reflects the sensitivity of the company's founder Henrik Fisker, who is known for his work on the BMW Z8 and the Aston Martin DB9. Fisker entered the public markets last fall through a SPAC merger agreement. Since the SPAC deal closed on October 29th, FSR's stake has increased 112%. Jonas from Morgan Stanley is impressed with this company and describes the “Fisker Value Proposition” as “… design, time-to-market, clean sheet user experience and management know-how” and says the schedule for the start of the 4th Quarter 22 for the ocean is likely to be met. “Fisker is specifically aimed at the home / car business as opposed to more commercial end markets where emotional design and user experience are more important. In addition, the company would like to create a completely digital experience from the website through the app to the HMI in the car and continue customer loyalty through its flexible leasing product, ”added Jonas. In line with his bullish outlook for the company (and the car), Jonas rates Fisker as overweight (i.e. buy) and sets a price target of $ 27 suggesting an upward move of 42% for the coming year. (To see Jonas' track record, click here.) With the TipRanks data, we found that Wall Street analysts had mixed views on Fisker. The stock has a moderate buy analyst consensus rating based on 7 ratings including 4 buy, 2 hold and 1 sell. The share price is currently $ 18.99, and the average target price of $ 21.20 implies an uptrend of ~ 12% for a year. (See FSR stock analysis on TipRanks) QuantumScape (QS) While Fisker is working on solid-state batteries as part of vehicle manufacturing, QuantumScape is establishing itself as a leader in EV battery technology and a potential supplier of the next generation of batteries and power systems to the EV market. QuantumScape develops and builds solid-state lithium-metal batteries, the currently available battery system with the highest energy density. The main advantages of the technology are safety, lifespan and charging times. Solid-state batteries are not flammable. They last longer than lithium-ion batteries and have less capacity loss at the anode interface. and their composition enables faster charging of 15 minutes or less to reach 80% capacity. QuantumScape is confident that these benefits will outweigh the current higher cost of the technology and create a new standard for EV power systems. The company's strongest link to EV production is its connection to Volkswagen. The German auto giant invested $ 100 million in QuantumScape in 2018 and another $ 200 million in 2020. The two companies use their partnership to prepare for large-scale development and production of solid-state batteries. Like Fisker, QuantumScape went public through a SPAC agreement late last year. The deal, which closed on Nov. 27, brought the QS ticker to the public markets – where it promptly surged above $ 130 per share. While the stock has slipped since then, it remains 47% up 47% from its NYSE opening. For Jonas from Morgan Stanley, investing in QS shares carries a high level of risk, but also a high potential reward. In fact, the analyst calls it “The Biotech of Battery Development”. “We believe their solid-state technology addresses a very large obstacle in battery science (energy density) that, if successful, can create extremely high value for a wide range of customers in the auto industry and beyond. The Risks of Switching From a single shift The cells for a production car are high, but we believe these will be offset by Volkswagen's commercial potential and role in taking over the early production ramp, “explained Jonas. Jonas notes that QS is a long-term stock and rates the stocks as overweight (i.e. buy). Its target price of $ 70 shows confidence in an upward move of 28% over a one year period. Granted, not everyone is as excited about QA as Morgan Stanly. QS's hold consensus rating is based on an even distribution between buy, hold and sell ratings. The stock is trading at $ 54.64, and its recent appreciation has brought it well above the average price target of $ 46.67. (See QS Stock Analysis on TipRanks.) To find great ideas for trading EV stocks at attractive valuations, visit TipRanks ‘Best Stocks to Buy, a newly launched tool that brings together all of TipRanks' stock insights. Disclaimer: The opinions expressed in this article are solely those of the presented analyst. The content is intended to be used for informational purposes only. It is very important that you do your own analysis before making any investment.