Is Warren Buffett-backed EV stock worth buying now?

Even before the heavy selling that pressured stocks around the world in recent sessions, the electric vehicle (EV) industry was facing particularly strong headwinds. High interest rates and stubborn inflation have created a tough environment for pricey discretionary items like EVs, and the result has been an all-out price war that has squeezed margins across the industry. While some smaller startups have collapsed completely, even the best in the sector — from Tesla (TSLA) to Byd Company (BYDDY) — have seen major corrections.

Even as inflation eases and a rate cut seems imminent, EV favorites continue to grapple with inventory backlogs, a slowing Chinese economy and new uncertainties surrounding the U.S. economy. But with BYDDY down about 20% from 52-week highs, it may be time to consider an entry point into this standout EV market.

About BYDDY Stock

Founded in 1995 and headquartered in Shenzhen, Byd Company (BYDDY) is a leading Chinese electric vehicle manufacturer, known for its advanced hybrid powertrain technology that offers a range of up to 1,200 miles. The company specializes in the research, development and manufacturing of automobiles, batteries and mobile phone components. It operates globally, including in China, Hong Kong, Macau, Taiwan and various international markets.

BYDDY has a market capitalization of $83 billion and its offerings include both plug-in hybrid cars and battery electric vehicles.

And of course, let’s not forget Warren Buffett’s stake in the company. Although Berkshire Hathaway (BRK.B) has pared back its BYDDY holdings in recent quarters as it builds a massive cash pile, the Buffett-led conglomerate still owns a 4.9% stake in BYDDY through its stock portfolio, as of mid-July. That’s worth about $1.5 billion, or 0.5% of Berkshire’s total stock portfolio.

Is BYDDY stock worth its price right now?

Byd Company shares are slightly negative YTD, underperforming the broader stock market. However, shares have rebounded about 25% higher since their 52-week lows in February.

BYDDY stock is trading at a price-to-earnings (P/E) ratio of 17.84 and a price-to-sales ratio of 0.81, suggesting the stock is trading in line with stocks in the consumer discretionary industry.

Additionally, investing in Byd Company offers a relatively rare dividend opportunity in the EV space, making it an exceptional choice for investors seeking passive income. The company pays an annual dividend of $0.87 per share, yielding 1.56% at current levels.

BYDDY records record deliveries

Byd Company has shown consistent, solid growth in deliveries over the past four quarters, which continued into Q2 of this year. Q2 sales reached a record high of 986,720, up 58% year-on-year and 40% year-on-year. BYDDY delivered 426,039 battery electric vehicles in the quarter, trailing Tesla’s market-leading total by just 18,000 vehicles.

Plug-in hybrid sales rose for the fifth consecutive month in July, increasing nearly 67% year-on-year to 210,799 units. BYDDY has sold more than 1 million PHEVs this year, up 44% year-on-year.
Looking at BYDDY’s financial results for Q1, the company reported revenue of $17.2 billion, which missed consensus expectations. However, BYDDY reported record gross margins of 21.9%, led by 28.1% for the automotive business. This is significantly higher than most of its competitors in the industry. This shows the company’s ability to maintain high production standards and control expenses in an increasingly competitive market environment.

Byd Company is expected to report earnings again later this month, with margins and deliveries likely to be the key metrics in focus.

BYDDY partners with Uber

Byd Company recently announced a new partnership with Uber (UBER) to increase electric vehicle adoption and develop autonomous vehicles on the ride-sharing platform. The multi-year agreement will launch in Europe and Latin America, with plans to expand to the Middle East, Canada, Australia and New Zealand. The partnership aims to introduce 100,000 electric vehicles to Uber’s platform, reduce the cost of electric vehicles and increase fuel adoption.

Through this agreement, Byd Company will offer Uber drivers incentives to switch to electric vehicles, including discounts on maintenance, charging, financing and leasing options, while integrating its autonomous driving technologies into Uber’s platform. This collaboration is expected to strengthen Byddy’s reputation in the electric vehicle sector in the coming months.

Amid rising trade tensions with the United States, Chinese firm BYDDY is avoiding Uber’s home market for now, amid reports that Chinese software could be banned from autonomous vehicles.

Earlier this year, Byd Company announced that it would build a production plant in EU member state Hungary. This strategic move is expected to increase Byd Company’s production capacity in Europe, reduce logistics costs and mitigate the impact of import tariffs.

More latest news about BYDDY

On July 6, Reuters reported that Byd Company will take a 20% stake in Thailand’s Rever Automotive, its main distributor in the region. The move strengthens BYD’s market position after recently opening a $490 million plant in Thailand. BYDDY has a 46% stake in Thailand’s electric vehicle sector.

Separately, Spy Shots recently revealed the new Byd Company Han. The sedan features aerodynamic tweaks like a U-shaped hood and a flatter B-pillar. The powertrain remains uncertain, with potential all-electric or plug-in hybrid options.

Earlier in May 2024, the company unveiled its flagship Shark truck. In addition, the company intends to launch an electric vehicle called Seagull at a very affordable price, masterfully integrating advanced features and cost-effectiveness.

What do analysts think about BYDDY?

From an analyst perspective, BYDDY stock currently offers an attractive investment opportunity with significant growth potential. In addition to Buffett’s ongoing endorsement, all seven Wall Street analysts covering the EV stock have given it a unanimous Strong Buy rating.

The target price for BYDDY shares was set at $72, which indicates an expected premium of 31.6% to the current trading level.

On the date of publication, Nauman Khan did not have (directly or indirectly) a position in any of the securities mentioned in this article. All information and data in this article is for informational purposes only. For more information, please see Barchart’s Disclosure Policy here.