Wall Street analysts have identified their top stocks to play a "supercycle" for electric vehicles and their associated infrastructure, in a sector Morgan Stanley said provides one of the biggest growth opportunities for long-term investment. Investors have poured money into electric vehicle (EV) stocks as countries around the world start a transition to so-called green energy. Electrification in general is a theme with "rare and compelling" opportunities for investors, according to Morgan Stanley. "EV infrastructure, energy transition, grid modernization, storage, and distributed power are converging to drive an Electrification supercycle," the bank stated in a research note this month. They described their stock picks as "a compelling way to play many key themes at once with lower risk" and said the sector has long-term growth potential. Analysts at asset management firm AllianceBernstein , meanwhile, said batteries for EVs would make up a $654 billion market by 2050 — up from $24 billion currently. And JPMorgan listed several auto stocks to play the "Clean Energy transition" theme. The banks' top picks include: Eaton , a U.S. firm making a range of electrical systems and components, is a pick for Morgan Stanley. It described the company as "the best way" to play a theme of electrical upgrades, as grids are modernized and replaced. "The company is 70% electrical with strong positions in US low and medium voltage electrical gear, which we believe are key pieces of infrastructure to enable EVs, distributed power, and upgrade the grid," the analysts wrote. The bank is overweight the stock. Morgan Stanley is also overweight French cable management group Legrand , "a pure play low voltage electrical supplies provider for which products around electricity management in buildings is important as part of the transition," according to its analysts. It also picked Germany-headquartered Siemens Energy as an overweight-rated stock, for its involvement in "the overall revamp of the electrical grid." AllianceBernstein, meanwhile, described the battery storage industry as nascent, and "still underestimated by most models," in a July 6 research note. The bank said the industry can grow around 70x between 2020 and 2050 in terms of the amount of energy stored, with passenger electric vehicles having the highest demand for batteries during that period. Energy storage capacity for wind and solar power is forecast to represent the second-highest demand for batteries, according to AllianceBernstein, with commercial vehicles and so-called micro-mobility (electric bicycles and scooters) following. Its outperform-rated picks include energy storage firm Samsung SDI and Amperex Technology, a Chinese battery manufacturer. JPMorgan's analysts picked stocks for a "European Clean Energy transition basket," in a July 5 note, including French auto supplier Valeo , Mercedes manufacturer Daimler and German firm Volkswagen , whose CEO Herbert Diess told CNBC in March it wanted to "get close and then overtake" Tesla for EV manufacturing. The analysts added that European automakers and components suppliers in the Stoxx600 index were up 24.6% in the year to date, beaten only by banks, with the sector up 25.6%.
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Wall Street analysts have identified their top stocks to play a "supercycle" for electric vehicles and their associated infrastructure, in a sector Morgan Stanley said provides one of the biggest growth opportunities for long-term investment.