Bank of America likes these EV stocks the best once the market washout is over

Published Thu, Jan 6 202210:15 AM ESTUpdated Thu, Jan 6 202210:57 AM EST

Newly public electric vehicle companies cratered on Thursday, building on recent losses amid a rotation out of high-growth stocks, but Bank of America believes the long-term bullish theme remains intact. The firm said investors should expect these stocks to remain volatile "over the next 3-6+ months as the volume environment (production/sales) remains choppy and visibility is significantly lacking." But ultimately, Bank of America said that the "electrification revolution has finally arrived" and listed EV companies among the stocks it believes will outperform in 2022. When it comes to Rivian , which went public in 2021 , analysts led by John Murphy said the company is "one of the most viable among the universe of start-up electric vehicle (EV) automakers." The firm said Rivian's product line focused on trucks, SUVs and vans makes it a competitive threat to incumbent automakers. Murphy added that the company has "one of the most comprehensive and well-defined business models addressing all stages of the vehicle life-cycle." The firm believes 2022 will see the early stages of commercialization for several of Rivian's models. The stock, which was originally priced at $78 a share, went public on Nov. 10. It ended 2021 at $103.69. Shares of Rivian surged to a record high of nearly $180 on Nov. 16, but cratered to a 52-week low of $75.13 on Thursday. The stock fell 11.2% on Wednesday to close at $90.01 after Amazon announced a partnership with Stellantis , the automaker previously known as Fiat Chrysler. The tech giant has also backed Rivian. "We always knew that our ambitious sustainability goals in our last-mile operations would require multiple electric delivery van providers," an Amazon spokesperson told CNBC in an email. "We continue to be excited about our relationship with Rivian, and this doesn't change anything about our investment, collaboration, or order size and timing." Lucid is another EV company that hit the public market during 2021, choosing to debut through a reverse merger with a special purpose acquisition company . The stock ended the year with a 280% gain, but is down about 45% since its Feb. 18 all-time high. However, Bank of America likes the stock, pointing to the company's innovative technology, attractive product, the management team's experience and a compelling brand. The firm said Lucid's backlog for its Air sedan stands at more than 17,000, which should be "supportive for the stock in 2022." The stock could be especially volatile toward the end of the month due to a coming lock-up expiration, CNBC's Jim Cramer noted recently . Auto demand has recovered since the pandemic took hold in March 2020, but the industry's comeback has been hampered by supply chain issues. Bank of America's Murphy believes these headwinds will persist during the first half of 2022, and he doesn't see pre-Covid volume levels returning until the middle of the decade. But after years of hype around electric vehicles, the industry is poised to take off. "2022 marks the year of commercialization for many of the start-up EV automakers, as well as the beginning of product launch efforts from the incumbent automakers," he wrote. "Combined with more regulatory push/pull, this should drive upside to our EV penetration forecasts." The firm also called supplier BorgWarner a top pick for 2022, saying it's misunderstood by investors. Bank of America said that the company has made a push over the last decade to diversify away from internal combustion engines to hybrid and electric vehicles. The firm pointed to BorgWarner's solid product portfolio that's exposed to industry mega-trends, as well as a strong management team and a compelling valuation. Shares of the company are up 19% over the last year. CarMax also makes Bank of America's list of top auto stocks for 2022, with the firm calling the company a battleground stock. Murphy said CarMax is in the midst of a transition from a legacy brick-and-mortar used vehicle retailer to an omni-channel platform. "KMX should continue to structurally increase its footprint through both new store openings (physical) and expansion of its online/omni-channel (digital) offerings, which should drive incremental unit/revenue growth and help improve store efficiency and earnings leverage," the firm said. Shares of the company are up about 21% over the last year. - CNBC's Michael Bloom and Jordan Novet contributed reporting.

The Rivian R1T on stage as a 2022 Truck of the Year Finalist at the LA Auto Show in Los Angeles, California on November 17, 2021.

Frederic J. Brown | AFP | Getty Images

The firm said investors should expect these stocks to remain volatile "over the next 3-6+ months as the volume environment (production/sales) remains choppy and visibility is significantly lacking."

But ultimately, Bank of America said that the "electrification revolution has finally arrived" and listed EV companies among the stocks it believes will outperform in 2022.