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Ignore Rivian’s $80B IPO Valuation, Here’s How to Play the Hot EV Market

0 | By Alex Kagin

Earlier this week, Rivian, one of the hottest electric vehicle makers, which boasts Amazon as a major investor, recently filed confidentially for an initial public offering. The thing that really stood out, was its $80 billion valuation despite not having sold a single vehicle. That is in stark contrast to the million + that Tesla has sold. Even Lucid Motors (NASDAQ: LCID) only has a $33B valuation and is much closer to production.

This all shows just how hot the EV market really is. Companies like Ford are releasing electric versions of popular vehicles like the F-150 Lightning, which was famously debuted by none other than President Biden.

Thus, it’s no surprise there continues to be so much excitement around this space. Every year approximately 17 million auto retail sales happen in the United States, which breaks down to almost 50 thousand passenger cars, light trucks, and SUVs sold every single day. Not to mentions millions of commercial vehicles. That’s a lot of potential business for companies like Rivian, which have a fleet of over 30,000 branded deliver vans with plans to create a fleet of 100,000 electric delivery vehicles.

Electric Vehicles are here to stay and with a penetration rate of roughly 2% of the U.S. new car market, there is still a ton of growth ahead.

That’s why I’m looking at one company that supplies some of the most vital parts for electric vehicles and advanced automotive safety (ADAS)…

I’m talking about ON Semiconductor (NASDAQ: ON), a diversified chip supplier selling products that include power and signal management, logic, and discrete and custom devices for automotive, communications, communications, and many other industries.

I’m especially excited about this company’s most recent analyst day discussing building the business around above-market growth industries like EVs and ADAS, there could be plenty of upside.

In its last quarter they reported 38% year-over-year revenue growth and divisions like automotive were up 70% year-over-year despite a slowdown in automotive builds. I always like to see numbers that show a company can still grow even if the industry sees a temporary slowdown.

ON semiconductor sees a huge opportunity in EVs with up to $750 worth of content per car in the powertrain and up to $1,000 in ADAS. These are the megatrends we just spoke about that they are capitalizing on. From EV charging and on-board charging systems to the converters that help power your car, ON is manufacturing those.

Right now, the sell side has targets as high as $60 per share, which is 35% higher than the current price. With the shift to electric vehicles, ON Semiconductor represents great potential for investing.


P.S.: I have even more ways to play the red-hot electric vehicle trend. These cutting-edge pieces of vehicular engineering need a wide selection of high-tech parts to work. That starts with ON’s semiconductors, but also includes batteries, magnets, and more. Each one will need a specialist company to provide it, and each of those companies will see incredible growth potential. You can get the full story on those companies right here.


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