10. November 2021 | 14:09 CET
BYD, Silver Viper, Varta: Is the discount battle for e-cars coming?
Experts, influencers and visionaries often hand out advance praise for years, but new technology often does not make it beyond the hip neighborhoods of Hamburg, Berlin or Munich. It is a different story with electromobility. Of course, anyone who commutes three-digit kilometers a day will still rely on diesel and may even have in mind the possibility of acquiring a modern annual car at a reasonable price in the foreseeable future. However, those who commute up to fifty kilometers and live in more densely populated areas often already opt for an e-car today. Fancy brands, such as Tesla and their affordable Model 3 journey, are doing the rest. We highlight three stocks that stand to benefit from the e-car breakthrough and ask whether the market is facing a discount battle.
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ISIN: BYD CO. LTD H YC 1 | CNE100000296 , SILVER VIPER MINER. CORP. | CA8283341029 , VARTA AG O.N. | DE000A0TGJ55
BYD: How can the breakthrough succeed in Europe?
About ten years ago, BYD's stock was already seen as a beacon of hope for electromobility. The Chinese Company was still known for its rechargeable batteries and preferably powered small vehicles, scooters or other companions. But the Company has evolved. Today, BYD builds its own cars, has cracked the sound barrier of 1,000 kilometers of range and is coming up trumps, especially in its home market. Recently, more BYD vehicles were sold in China than Tesla. That is also because the Chinese like to be patriotic when it comes to new technology and because BYD is quite competitive in terms of both price and quality - no matter how much Tesla boss Elon Musk ridicules the Chinese.
Most recently, BYD successfully raised capital in Hong Kong. In October, the 249% increase in vehicle sales to 81,040 cars with electric and hybrid drives may have contributed to investors' buying mood. Measured against the full year, the figures are up significantly, by more than 200%. Because BYD owns its chip division, the Company can make inroads and gain market share during a market period when competitors are suffering from chip supply issues. The stock is up nearly 15% over three months. In the long term, the positive trend is picking up again after a somewhat weaker first half. It would be unthinkable if the BYD brand could also develop a certain charisma in Europe or the USA. However, the breakthrough there can only be achieved through price. While this is good for customers, it is only positive for investors to a limited extent.
Silver Viper: Anticyclical thinking around the corner
Silver Viper is a stock benefiting from the boom in electric mobility just as much as from the energy transition. A little more than a month ago, we highlighted the share in this article. Since then, the positive market sentiment initially pushed the value up significantly before the share went back into a slight consolidation. Silver Viper operates the La Virginia Silver Project in Mexico, where it has already unearthed grades of 3.15 g/t gold and 228 g/t silver over 13.13m. Further exploration and a resource estimate update are planned for the coming months. Due to the early stage of exploration work, the stock can leverage the silver price and positive developments around renewable energy.
Typically, the market values commodity deposits in the ground at a significant discount - after all, some preliminary work is needed before the silver, or other metals are at the surface. How large these valuation discounts have to be, however, is unclear. From minimal discounts to huge markdowns, everything is possible. Anticyclical investors and traders can take advantage of this. Currently, Silver Viper is trading only slightly above its 52-week low. Those who have patience and assume that either rising precious metal prices or the search for shares that have something to do with e-mobility will kiss the value awake can take a closer look at Silver Viper.
Varta: Doubts remain here
Varta's stock has long been kissed awake. Unlike Silver Viper, however, the market has already given it more extensive advance praise. And no wonder: While the small silver explorer is a pure growth company, Varta successfully produces batteries. The Company also wants to supply manufacturers of e-cars soon. Since Varta is an established company, the market attaches a much higher probability to these plans than would be the case with small and unknown companies. As a result, if the mood on the market turns or if quiet doubts are raised, there is potential for a setback. That is what happened with the Varta share - hardly anything has happened here over the last year, and in the last three months, the share price has fallen by around 29%. Even analysts have recently become less optimistic.
To profit from e-mobility or renewable energies, investors should choose companies with prospects. With its battery and chip division and its market position in China, BYD is one such candidate. Investors may become more skeptical if the market, for example, praises Varta, even though it can be difficult for a German battery manufacturer to score internationally. After all, the competition from the Far East is sometimes ahead. Away from the hype, there are also smaller stocks such as Silver Viper. Here, the e-car fantasy only emerges at a second glance, but investors do not have to chase the share price. Suppliers of basic materials may also be largely unaffected by a potential price war.