Toyota

These battery stocks could create shareholder value thanks to growth in the electric vehicle (EV) market.
FREYR Battery (FREY) — Agreements with large energy companies are likely to provide a growth roadway ahead.
Panasonic (PCRFY) — A new facility in Japan dedicated to the production of EV lithium-ion batteries should speed up production and increase revenue.
QuantumScape (QS) — A new research and development center in Kyoto will open a new market of customers in the Asia-Pacific region.
Romeo Power (RMO) — A recent agreement to provide lithium-ion batteries for a new line of low-speed EVs could mean enhanced revenue.

Battery stocks, our topic for today, have had a rough year so far. Fears of an economic downturn have added to the woes of an industry plagued by persistent supply chain issues.

Yet, in the long-run, the outlook remains bright for companies in the growing electric vehicle space. Recent research highlights, “Between 2020 and 2026, the size of the global electric vehicle market is expected to increase over four-fold to reach an estimated market size of some one trillion U.S. dollars by 2026.” Such an increase would mean a compound annual growth rate (CAGR) of over 23%.

High inflation and expected interest rate hikes have made investors wary of putting names in high-growth names that may not yet be profitable. Since the beginning of 2022, the S&P Kensho Electric Vehicles index has fallen 33.5%. During the same period, the Global X Lithium & Battery Tech ETF (NASDAQ:LIT) has dropped 15.4%.

Despite recent losses, many analysts concur that electric vehicles are the future of transportation. Therefore, manufacturers of key components for these cars are likely to soar as consumers switch to all-electric in the face of climate concerns as well as rising gas prices.

With that information, here are four battery stocks to buy in the coming months:

FREYR Battery (FREY)

The first stock on today’s list, FREYR Battery (NYSE:FREY), comes from Norway. It design low-cost lithium-ion batteries for a variety of applications. It is building a facility in Norway, slated to begin production of lithium-ion batteries later this year.

Earlier this month, this pre-revenue company reported first-quarter financials. Net loss was $34.9 million, compared to a net loss of $28 million the previous quarter. Loss per share was 30 cents, compared to 24 cents in Q4 FY21. Cash and equivalents totaled $524.6 million.

Recently, the company announced an offtake agreement with Powin, an Oregon energy-storage solutions provider. FREYR has agreed to supply Powin with 28.5 GWh of battery cells from 2024 to 2030. This transaction represents the latest in a series of offtake agreements with other companies, including Siemens Energy (OTCMKTS:SMNEY), AP Moeller – Maersk (OTCMKTS:AMKBY), and Honeywell International (NASDAQ:HON).

FREY stock is down 32.8% year-to-date. The 12-month median forecast stands at $18 a share. FREY Battery’s market capitalization is currently shy of $1 billion.

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Panasonic (PCRFY)

Next up on our list is the consumer electronics giant Panasonic (OTCMKTS:PCRFY). The Japanese group is also the world’s third-largest producer of EV batteries. It has partnerships with Toyota Motor (NYSE:TM) and Tesla (NASDAQ:TSLA) to produce batteries for their EVs.

In early May, Panasonic released FY22 financials. Net sales were 7.39 trillion yen ($57.81 billion), up 100% year-over-year. Net profit attributable to shareholders also went up by 155%.

Investors paid close attention to the Energy segment, where sales increased by 27% to 764.4 billion yen from a year ago. This is due to increased sales of automotive batteries and power storage systems with significant growing demand for EVs globally as well as growing demand for Internet-of-Things (IoT) and social infrastructure use.

In fiscal 2023, management expects strong revenue, thanks to recovery in the automobile and aviation industries as well as growing demand for automotive batteries, according to a statement.

Panasonic recently announced construction plans for a new lithium-ion battery production facility in Japan. Production should begin in March of 2024.

Despite the positive outlook, PCRFY stock has lost about 19.6% since January. The current price supports a dividend yield is 2.21%. Shares are trading at 10.76 times forward earnings and 0.37 times trailing sales. Finally, the 12-month median forecast stands at $11.44.

QuantumScape (QS)

Our third battery stock pick is QuantumScape (NYSE:QS). This pre-revenue group focuses on solid-state EV batteries. It is working on developing a fast-charging, anode-less EV battery, capable of recharging up to 80% in 15 minutes.

In late April, QuantumScape issued Q1 metrics. GAAP net loss totaled $90.4 million, compared to $75 million the year before. Diluted loss per share was 21 cents. The year before, diluted loss per share was 20 cents.

Management recently announced a new office and research laboratory in Kyoto, Japan. This stepping stone into the Asia-Pacific market could help QuantumScape take advantage of the already thriving battery industry in Asia. Meanwhile, investors stateside are more than ready to see commercial production and revenues before too long.

In November 2021, QS stock hit a record high of $43.08. But the past six months, we have seen a different story and it is down 44.3% YTD. At present, the 12-month median forecast stands at $19. The market cap for QuantumScape is $5.21 billion.

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Romeo Power (RMO)

The final battery stock for today is Romeo Power (NYSE:RMO). It designs modular batteries for a variety of EV applications, ranging from delivery vans to long-haul trucks.

In early May, Romeo Power released Q1 financials. Revenue was $11.6 million, compared to $1.1 million the year before. Diluted loss per share was 60 cents.

Recently, the company announced it’s become the sole provider of lithium-ion batteries for an undisclosed manufacturer’s new line of next generation low-speed electric vehicles (LSEVs). According to Romeo, their batteries were chosen specifically to meet the high-reliability requirements of the customer.

Like its peers, RMO stock has suffered in 2022 and is down close to 74%, dragging the market cap down to $132.7 million. Shares are changing hands 6.95 times trailing sales. Finally, the 12-month median forecast stands at $1.80.

On the date of publication, Tezcan Gecgil did not have (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.

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Earlier this year, for the first time ever, New York City’s beloved Empire State Building became a smart-energy skyscraper that is now 100% powered by wind.

Last summer in Chattanooga, city officials completed the installation of its Ultra Smart Streetlight system, created by Global Green Lighting. The system uses a technology called the FlexNet lighting control system to monitor and control 350 energy-efficient LED fixtures along a 35-mile grid. The new system promises to provide a safer environment for residents walking at night while also reducing the city's carbon footprint.

As reported by Mashable, Don Lepard, the president of Global Green Lighting, states:

The lights are programmed to operate at 50% during park hours, then turned up to 100% when the park is closed at 11:00 p.m. Then they are dimmed back down to 50% and turned off after 12:00 p.m..

In Denver, Panasonic is teaming up with city planners to build Peña Station NEXT — “a 400-acre, transit-oriented development destined to become America’s next great smart, sustainable mixed-use community,” according to the project press release.

The press release continues:

Smart city solutions being deployed at Peña Station NEXT will include an innovative solar-plus-storage microgrid, smart LED streetlights with video analytics… community Wi-Fi, electric vehicle charging stations, and autonomous electric shuttles.

In short, the goal is seamless mobility and sustainability.

And the U.S. isn’t the only place where cities and towns are changing. Europe and Asia are making impressive strides in smart-city design as well.

A Global Phenomenon

Amsterdam, the Netherlands' capital city, was one of the earliest adopters of smart-city initiatives. In 2016, the city won the European Capital of Innovation Award. In 2017, the Netherlands ranked third in the Global Innovation Index.

Moreover, London, Milan, Lisbon, Bordeaux, Burgas, and Warsaw are also helping lead the way in smart-city development. The joint Sharing Cities program is a major international smart-cities project that addresses some of the most pressing urban challenges cities face today. This includes energy use, carbon emissions, and data management projects. The fellowship brings together 34 partners from across government, industry, and academia to create harmonious solutions.

Not to be outdone, China has over 200 smart-city projects already in various stages of planning and development. Singapore is another nation investing heavily in smart-city technology.

Most recently, Toyota Motor Corporation announced it has started construction on a 175-acre smart city at the base of Japan's Mount Fuji, roughly 60 miles outside Tokyo.

Toyota’s “Woven City” is expected to function as a testing ground for technologies like robotics, smart homes, and artificial intelligence. A starting population of about 360 inventors, senior citizens, and young families will test and develop new smart-city technologies.

Toyota describes the city as a “living laboratory.

The eventual plan is for the city to house a population of more than 2,000 Toyota employees and their families, retired couples, entrepreneurs, and scientists.

Danish architect Bjarke Ingels, designer of Google's headquarters in California, is tasked with planning the layout of the city. In describing its plans, Toyota states streets in Woven City will be designated for three types of use — one for self-driving vehicles, one for personal transporters like bikes, and one for pedestrians only. To minimize the carbon footprint, homes will be built from wood and use sensor-based AI to monitor for emergencies and the occupants’ general well-being. Construction on the city began last month.

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Most importantly, there’s a flood of investment capital moving into this industry and the ones making smart cities happen. And these will offer early movers fantastic returns as smart cities move into the mainstream.

How to Cash in on the Smart City Trend

According to GlobeNewswire, “The global smart-cities market size is expected to grow from $410.8 billion in 2020 to $820.7 billion by 2025, at a compound annual growth rate (CAGR) of 14.8%.”

There are numerous factors driving this growth, such as government initiatives for overpopulation and urbanization, resource management, etc. With the emergence of AI, IoT, 5G, and other technologies, we’re now seeing an uptick in smart-city development across the globe.

At least $3.7 trillion per year in infrastructure investment will be needed from now until 2035 to support the expected growth of these cities, according to McKinsey data.

That’s a lot of money to spread around and as you would expect, the world’s leading tech investors are already claiming their stakes in this new, highly profitable space.

Arizona’s Belmont project is controlled by the real estate group Belmont Partners, which in turn is controlled by Bill Gates’ Cascade Investment LLC.

Coincidence? I think not…

Peter Thiel is also a smart-city investor. The well-known tech visionary is a major backer of the Seasteading Institute, a nonprofit looking to build smart cities in French Polynesia.

And, of course, Elon Musk has his hand in the cookie jar too.

The eccentric billionaire is already developing a smart city outside of Melbourne, Australia. The new city will feature futuristic homes with rooftop solar systems, battery storage units, and electric charging ports for EVs.

Of course, building our own smart cities for the chance at ridiculous profits like Bill Gates, Peter Thiel, and Elon Musk is out of the question for normal folks like us.

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But that doesn’t mean we can't still be first movers on this trend and pull in huge gains like they will.

Behind every new smart city that will ever be created is one underlying technology — and it’s this technology that will allow you to score massive returns on disruptive trends like smart cities.

Kevin Kelly, founding editor of WIRED, predicts:

Whoever dominates [this new technology] will become among the wealthiest and most powerful people and companies in history…

The best part is you can invest in the one technology that makes all this possible right now.

To your wealth,

Sean McCloskey
Editor, Energy and Capital

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