At first glance, battery stocks don’t seem to have much juice in 2023.
Check out the Global X Lithium & Battery Tech ETF (ticker: LIT). The popular exchange-traded fund is down 8.3% on a year-to-date basis against the S&P 500’s 14% gain as of Oct. 11.
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This is a fund that holds tech industry stalwarts like Tesla Inc. (TSLA), Rivian Automotive Inc. (RIVN) and Albemarle Corp. (ALB). In fact, the three of those funds together make up 22.1% of the fund, and all three stocks are struggling in the last 90 days, down 2.5%, 22.1% and 30.9%, respectively.
All of the stocks are also tied directly to the battery sector, either as components manufacturers and providers or as major battery buyers.
Why Investors Should Consider Battery Stocks
So what’s going on in the battery industry, and why should investors give battery stocks a second look?
Long-Term Demand for Battery Power
First, there’s a burgeoning long-term demand for battery power, although demand has softened in the short term. With an overall rise in demand for electricity as sustainable goods and services have taken center stage in recent years, industry analysts expect utility power usage to expand in the next decade.
Yet in 2023, utility power demand is actually down. Last year, demand hit a record 4,048 billion kilowatt-hours (kWh), according to the U.S. Energy Information Administration. Due to higher prices, sluggish economic growth and less extreme weather in 2023, demand is expected to sink to 3,984 billion kWh. That leaves room for an anticipated comeback.
Lithium-Ion Battery Demand for EVs
Second, high demand for lithium-ion batteries to charge electric vehicles, homes and businesses, and major power infrastructure has fueled a rise in battery manufacturing and services activity, which should help meet rising electricity needs.
“Record sales of EVs, strong investment in battery storage for power (which is expected to approach $40 billion in 2023, almost double the 2022 level) and a push from policymakers to scale up domestic supply chains have sparked a wave of new lithium-ion battery manufacturing projects around the world,” according to the International Energy Agency.
If you appreciate a long-term investment perspective, it’s reasonable to expect the battery sector to rise up and start delivering the goods for sector investors. In the meantime, here’s a selection of top battery stocks to consider when building the energy side of your investment portfolio:
| Battery Stock | Market capitalization |
| NextEra Energy Inc. (NEE) | $108 billion |
| Honeywell International Inc. (HON) | $122 billion |
| QuantumScape Corp. (QS) | $3 billion |
| Lithium Americas Corp. (LAC) | $1.5 billion |
| Freyr Battery (FREY) | $581 million |
| Solid Power Inc. (SLDP) | $325 million |
NextEra Energy Inc. (NEE)
NextEra Energy isn’t exactly shining in 2023, as share prices are down 34.7% through Oct. 11. Like other power providers, NEE is suffering as the utility sector has taken a big step back in 2023. Not only are prices up, but demand for sector stocks has waned as rising Treasury bond yields
have driven investors to the fixed-income marketplace and away from utilities. Industry analysts are also weighing in on the downside, with Bank of America analyst Julien Dumoulin-Smith cutting his price target on NEE from $76 to $53 per share.
As the world’s largest solar and wind energy producer, NEE should have some serious upside over the long haul. The utility sector sell-off looks like it’s losing steam, and NextEra recently stated it would grow its dividend per share by 10% through 2024, which should help share prices rebound. At present, NEE has a 3.6% forward dividend yield.
Honeywell International Inc. (HON)
Honeywell’s share price is starting to turn around in the last 30 days after a rough first half of 2023. In the meantime, HON is relying on its expanding aerospace footprint to gain ground with investors.
Fairly soon, however, the company’s new “flow battery” product should be a bottom-line contributor, too. The battery enables utility companies to store significant amounts of energy from renewable sources for up to 12 hours.
With a slew of battery contracts with utility providers and a new strategic contract with Duke Energy Corp. (DUK) that will bring Honeywell battery energy storage systems to cities across the country, Honeywell is a stable first step for investors looking to leverage the global battery market. The Charlotte, North Carolina-based company raised its full-year sales guidance to a range of $36.7 billion to $37.3 billion compared with its earlier estimate of $36 billion to $37 billion.
HON shares will also offer investors a healthy 2.3% dividend yield in the fourth quarter of 2023, a 5% uptick from the previous quarter.
QuantumScape Corp. (QS)
This San Jose, California-based next-generation battery manufacturer is looking to shift the industry to solid-state batteries that would replace lithium-ion batteries — and the shift could phase in by 2025. That’s the target date for commercial production for QuantumScape’s solid-state batteries, which promise faster charging times, better efficiency and safer use by businesses and consumers.
The automotive industry is expected to have motivated buyers for the new QuantumScape batteries, and battery prototypes are already in the hands of industry specialists. However, investors seem to be getting impatient with QS, as the stock price has fallen by 35.5% over the past three months.
Yet, the company has a sturdy $3 billion market capitalization and plenty of cash on hand to fund operations until its manufacturing plants are up and running. The downside risk is substantial, however, as the company’s advanced solid-state battery technology may arrive after competitors have already launched their own versions. Consequently, investors should consider QS a high-risk, high-reward play and weigh their own risk tolerance before buying any QS shares.
[10 of the Best Stocks to Buy for 2023]
Lithium Americas Corp. (LAC)
With EV sales more than tripling since 2020, the demand for lithium-ion batteries should be huge in coming years. That’s especially the case as key components needed for lithium batteries will be in short supply in 2024 through 2026, according to a new study from S&P Global Commodity Insights.
That should be good news for Lithium Americas, which recently split into a pair of independent businesses, signaling a new journey for LAC and its investors. The two companies are Lithium Americas (Argentina) Corp. (LAAC) and Lithium Americas, and each offers opportunities to investors. The latter is poised to get a record $1 billion loan from Uncle Sam to drive its Thacker Pass lithium mining entity. General Motors Co. (GM) is also backing LAC with a $650 million lithium development bankroll.
The funding should help LAC expand one of the world’s potentially richest lithium deposits on land at the Nevada-Oregon border. The Lithium Americas-owned tract reportedly could hold 20 million to 40 million metric tons of lithium.
Freyr Battery (FREY)
This Norway-based battery manufacturer is an emerging force in the next-generation EV battery-production market, but the company isn’t expected to really get the ball rolling until 2024 or 2025. By then, it will have completed its needed manufacturing plants and can start full production using battery technology offered by 24M, a spinout from the Massachusetts Institute of Technology.
Freyr says it is on track to achieve annual 50-gigawatt-hour battery production capacity by 2025 — and 200 GWh of annual capacity by 2030. Freyr also has a recent contract with Honeywell to provide 19 gigawatt-hours worth of batteries between 2023 and 2030.
The company did report a second-quarter net loss of $25.3 million, mostly from costs linked to its manufacturing and operations, which should yield profits starting sometime in 2024.
In June, Freyr announced that it reached a milestone of charging its first semi-automatically produced battery unit cells. It followed that up in July with a 100 million-euro grant ($105.5 million) from the European Union for its fully renewable energy-charged Giga Arctic production center. For patient investors with a long-term view, FREY could deliver a major payoff in the next two years.
Solid Power Inc. (SLDP)
Companies like General Motors, Ford Motor Co. (F), Bayerische Motoren Werke AG (BMWYY) and Toyota Motor Co. (TM) have shown their interest in solid-state battery technology, and that’s where Solid Power comes into the picture.
The company’s battery model uses a solid electrolyte layer between the cathode and anode, which increases energy density and decreases overall weight while also providing a safer profile compared with current lithium-ion batteries. There’s big demand for this type of battery — especially within the EV automotive market — and SLDP has a solid grip on development and production.
Revenue trends are backing that sentiment up. The company’s second-quarter numbers were up significantly, with revenue at $4.9 million, an increase of $2.3 million compared with the second quarter of 2022. First-half revenue was $8.7 million in 2023, up $3.9 million year over year. As the company’s batteries increasingly find their way into automakers’ hands in the last three months of 2023, expect those revenues to keep churning upward.
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6 Best Battery Stocks to Buy and Hold originally appeared on usnews.com
Update 10/12/23: This story was previously published at an earlier date and has been updated with new information.
