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Wall Street Foresees Robust Growth for Electric Vehicles and Semiconductors


Lauren Miller

June 4, 2024 - 09:47 am


Wall Street Brims with Optimism for Zeekr and Broadcom

Wall Street has its sights set on two notable players in their respective arenas—Zeekr, a rising Chinese electric vehicle maker, and Broadcom, a robust player in the semiconductor field. The recent analyst projections and ratings have sparked discussions and a bullish outlook for these companies, with Bernstein and a couple of America's leading banks taking the front seat in championing these firms' bright futures.

Zeekr Shines with Promising Forecasts

The electric vehicle market has been nothing short of electrifying, and Zeekr is rapidly becoming a shining star amid this vast landscape. The Chinese EV manufacturer, already making notable waves, has been the centerpiece of conversations among Wall Street's finest following strong endorsements from heavyweight financial institutions Goldman Sachs and Bank of America.

In the sparks of the early hours on a Tuesday morning, Goldman Sachs analyst Tina Hou and Bank of America analyst Ming Hsun Lee both initiated Zeekr with an enthusiastic buy rating. Hou placed a striking 12-month price target on the company's stock at $34, while Lee's forecast edged slightly higher with a mark at $35. These price objectives suggest considerable increases of 33% and 37%, respectively, from the closure figures of Monday's market.

The bullish sentiment is underpinned by the belief that Zeekr is strategically positioned to leverage the prominent trends reshaping China's EV landscape—domestic brand growth, premium vehicle demand, and the surge in vehicle electrification. Bank of America's Lee commended Zeekr for its competitive edge, citing the brand's proficiency in realms such as vehicle design, safety, smart cabin features, and charging experiences, all contributing to an impressive user community.

In this year alone, Zeekr has captivated a 1.3% share in the market, but this share is expected to almost double by the year 2026, reaching 2.5%, as foreseen by Lee. He attributes this anticipated growth to the brand's endeavor towards expanding its robust model portfolio. The synergy between Zeekr and its parent company, Geely Automobile, is a potent force multiplier, granting Zeekr access to Geely's structural resources—ranging from engineering excellence and supply chain prowess to global presence—all beneficial for its foray into international waters.

Analysts are not merely focusing on the capacity for growth but are also recognizing the sustainable profitability that could arise from launching in-demand models leading to consistently strong sales figures. Hou speaks to the distinctiveness of Zeekr's strategy, emphasizing the brand's choice for an asset-light manufacturing model which lets the company utilize Geely's facilities to restrain the hefty capital expenditure burdens typical of the industry.

As it stands, Zeekr's presence on the stock market is relatively new—its IPO was just last month, penciled in at $21 per share. However, in this short stint, the company's shares have already seen a 22% uptrend, signifying a receptive market and investor interest in its growth narrative and market strategy.

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Broadcom Rides High on Analyst Acclaim

Moving from the roads to the world of high-tech, Broadcom has also earned accolades from Bernstein with Analyst Stacy Rasgon highlighting the semiconductor giant as one of the firm's 'best ideas.' With a thriving performance this year, the expectation is that this momentum will not only maintain but also significantly increase. Broadcom is looked upon with an outperform rating, bolstered by a $1,600 price target by Rasgon. This target suggests a promising 21% potential upside from current levels.

In the backdrop of a tech sector burgeoning with innovation, Broadcom's journey in 2024 has been noteworthy, with stock prices soaring to nearly a 19% increase to date. Yet, Rasgon maintains that despite the compelling upswing in Broadcom's stock price, the company's valuation still holds a remarkable appeal. He juxtaposes Broadcom's solid status and history with the semiconductor industry, accentuating the improved quality of its narrative over time.

Beyond straightforward valuation, Broadcom finds itself compared with some of the most buzz-worthy names in the field purveying artificial intelligence technologies. Currently, Broadcom’s shares are trading at approximately 28 times forward earnings. Meanwhile, AI industry darling Nvidia boasts a multiple of 42, and AMD, another significant player in the semiconductor space, trades at 46 times forward earnings. Yet, to the discerning analyst, Broadcom's narrative and value proposition continue to shine amidst its peers.

Prospects and Projections: The Investment Rationale

As investors turn their telescopic sights upon the horizons that Zeekr and Broadcom are crafting, the strategic stances and investment theses presented by these industry analysts on Wall Street echo a common sentiment: the potential for substantial growth and value creation.

For Zeekr, the marching orders are clear. The usage of Geely's already established infrastructure, engineering talents, and recognized branding is not just a clever maneuver but a tactical lever that Zeekr is set to pull effectively. The brand's adoption of an 'asset-light' approach by sharing production responsibilities with Geely could prove to be a game-changer that not only reduces capital expenditure but also allows for nimble responses to market demands.

Similarly, Broadcom's place in the semiconductor industry is robust, and the recent spike in its stock price speaks to the faith investors place in its trajectory. Rasgon's assessment places Broadcom in a position of strength, implying that its affordable valuation, in comparison to its history and the unfolding narrative of AI semiconductor players, makes it a standout investment opportunity.

The semiconductor sector endures as a cornerstone of modern technology, driving progress in sectors from consumer electronics to AI and beyond. Broadcom, standing as a stalwart with a reach into various technological domains, is seen not just as an industry participant but as a vanguard of the global march towards an increasingly connected and smart technology landscape.

A Closer Look at Zeekr's Market Advantage

Zeekr's Innovation and R&D: Innovation and research and development (R&D) are not just buzzwords at Zeekr; they are actionable virtues at the crux of its operations. Through its engineering acumen, Zeekr has managed to craft vehicles that resonate with both safety aficionados and design enthusiasts. Its pursuit of 'premiumization' is not a mere tilt at windmills but a strategic play to attract a segment of consumers enticed by luxury juxtaposed with environmental consciousness.

Global Expansion and Community Building: The EV maker's sights are not limited to the boundaries of China. With its parent company's global footprint taking the lead, Zeekr is strategizing an entry into the world market, where community engagement and customer experiences stand paramount. In a fiercely competitive environment, community building becomes a potent tool, fostering brand loyalty and an enduring customer base—a tact Zeekr seems adept at using.

Zeekr's ambitions are formidable, and their market positioning is fortified by the strategic anchorage of its parent company, Geely Automobile, which itself carries a significant clout in the automobile sector. The shared resources and technologies pave the future with a blueprint brimming with potential and guided by Geely's own expansive automobile know-how.

Broadcom's Strategic Valuation and Investor Confidence

Value Against AI Heavyweights: Broadcom's relative value proposition against leading AI companies is not something to be glossed over. With a significantly lower forward earnings multiple, Broadcom could be perceived as a bargain in an ocean of over-value, especially when one considers the potential and scalability of AI technologies. Despite more glamorous narratives swirling around newer AI entrants, Broadcom's foundation and industrial heft carry a reassuring solidity that resonates with investor confidence.

Implications of Forward Earnings: When analyzing semiconductor stocks, forward earnings multiples offer a window into future profitability and are a metric closely observed by investors. Even though Broadcom trades at a lower multiple than its AI-centric counterparts, this aspect may be the very reason savvy investors see it as a golden opportunity. The reasonable trading multiples coupled with strong performance affirm the company's ability to capitalize on AI without falling into the pitfall of overvaluation.

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The Road Ahead

The respective trajectories of Zeekr and Broadcom illustrate two critical storylines within the tech and automotive sectors. Even as market dynamics shift and consumer behaviors evolve, their grounded strategies and forward-thinking projections have positioned them as important entities to watch in the coming months.

With the electric vehicle race accelerating and the global semiconductor market continuing to expand, the enthusiastic ratings and targets set by Goldman Sachs, Bank of America, and Bernstein are not only indicators of confidence in these companies but shine a spotlight on the broader growth prospects within these industries.

Investors and market spectators alike will be keen to observe how these projections play out in the real world, but for now, the chorus of approval from some of Wall Street's most notable analysts rings clear for Zeekri and Broadcom. As markets open and shares trade, the story of these two firms continues to unfold, presumably to the tune of progress and profitability.