Investors who bought high-growth investments such as electric vehicle stocks after Covid 19 saw their investments soar. However, as growth stocks fell out of favor with investors, they crumbled the most in the bear market this year. Investing in established names for the long haul is a great strategy, but investors should avoid these electric vehicle stocks to sell or risk further losses.
The fate of a new company hinges on its ability to generate revenue. The more time passes, the better chance it has at success, even if you’re still in your startup days and haven’t yet made any profits.
The automotive industry is transitioning away from internal combustion-powered cars and towards electric vehicles.
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This change will have major ripple effects for multiple industries, with multiple states announcing plans in 2035 to phase out sales of new combustion engine vehicle purchases by law while other nations worldwide plan on allowing only EVs by 2020 or earlier.
Nevertheless, all EV stocks aren’t the same, and here are seven you should probably avoid in the current investing environment.
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Rivian Automotive |
$32.17 |
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Nikola |
$2.96 |
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ElectraMeccanica |
$3.98 |
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Hyzon Motors |
$1.74 |
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Lordstown Motors |
$1.69 |
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Proterra |
$4.74 |
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Blink Charging |
$14.55 |
Rivian Automotive (RIVN)
Source: Michael Vi / Shutterstock
It’s been a series of unfortunate events this year for EV start-up Rivian Automotive (NASDAQ:RIVN).
The firm, already plagued with production delays, cut its 2022 production target from 50,000 EVs by 50%. If that wasn’t enough, it had to recall 12,212 EVs due to a loose seat fastener.
The recent developments with Rivian reflect the risk of investing in an EV start-up with limited manufacturing experience. Investors have gotten used to its production delays, but recalls are likely to cause long-term damage to its brand and weigh down its future sales.
Consequently, its stock is down over 70% from its peak and should continue losing more value in the current risk-off environment.
Nikola (NKLA)
Source: Stephanie L Sanchez / Shutterstock.com
Nikola (NASDAQ:NKLA) aims to become a top player in the fast-growing electric heavy-duty truck industry.
Despite its progress, its stock hasn’t moved much over the past several months. Even after reporting relatively strong second-quarter results and the federal incentives for electric truck purchases as part of the Inflation Reduction Act, NKLA stock hasn’t moved much.
Investors expect a tough road ahead for Nikola in its efforts to ramp up production and delivery volumes for its battery electric and fuel cell trucks.
Though it showed a notable operational improvement in the first half of the year, there’s still plenty to do to become a leading player in the class 8 trucks market. It is positioned within a strong demand environment where commercial EV adoption is increasing rapidly, but whether it can benefit from the tailwinds remains a big question mark.
ElectraMeccanica (SOLO)
Source: LookerStudio / Shutterstock
ElectraMeccanica (NASDAQ:SOLO) is a Vancouver-based automobile company that aims to commercialize three-wheeled, single-seat EVs. Analysts are skeptical of the product’s long-term success, reflected in SOLO stock’s performance over the past couple of years.
Though it’s one of the cheaper EVs out there, it’s tough to see how people would want to drive its odd-looking product on a sizeable scale.
Four-wheeled cars are ubiquitous in the market, but SOLO hopes to change that and carve out its niche with its three-wheeled approach.
That means it not only has to convince buyers to purchase one of its EVs but buy it in a form that is alien to them. The chances of that happening at scale is unlikely. To make matters worse, its debt levels are up significantly from a year ago, while its cash equivalents are down $74 million after the second quarter.
Hyzon Motors (HYZN)
Source: Takashi Images/Shutterstock
Hyzon Motors (NASDAQ:HYZN) is a fuel cell EV producer that has been the center of multiple controversies.
Last year, its shares were hit hard after a short seller report alleged that its business was a sham. Though its management quickly refuted the report, the allegations resulted in several lawsuits and weighed in on its business performance.
Consequently, HYZN has withdrawn its previously issued operational guidance, rendering its previous financials unreliable.
Its board of directors has hired third-party consultants to assist in reassessing the company’s global strategies. With its previous financials and outlined strategy being null and void, it’s tough to assign any value given its dwindling cash balances. Therefore, investors should sell existing positions and avoid HYZN stock.
Lordstown Motors (RIDE)
Source: Postmodern Studio / Shutterstock.com
Lordstown Motors (NASDAQ:RIDE) is another budding EV producer struggling with lingering supply chain issues.
The troubled investing sentiment places it in a tough spot to continue operating its business without raising a hefty amount of capital.
Its management forecasts a massive operating loss of $140 million for the year’s second half and less than $5 million in revenues for the full year.
The company was able to close out multiple strategic transactions with its partner Foxconn. However, the proceeds from these transactions will likely be insufficient to fund its business for the rest of the year.
It will need another $150 million for its capital expenditures, which is a tough ask given the current troubling market situation. Therefore, its best for investors to short the shares or exit their positions, as bankruptcy remains a likely outcome for the firm.
Proterra (PTRA)
Source: Dana Kenedy / Shutterstock
Proterra (NASDAQ:PTRA) is an EV technology company that has performed exceedingly well in the past few years.
It has two operating segments that provide technology solutions for commercial vehicle producers and fleets. Proterra also provides software services and turn-key fleet-scale, high-power charging solutions.
Over the past three years, the company has done remarkably well in growing its top line. Revenues have grown 34% from 2019 to 2021. However, even with sales growing rapidly, profitability remains a major issue. Net losses have risen significantly faster, at 146% from 2019 to 2021.
To complicate things even more, revenue growth has slowed down of late due to the current economic headwinds, and losses continue to increase at an incredible pace. Its stock, however, trades at a lofty 4.1 times trailing twelve-month sales.
Blink Charging (BLNK)
Source: David Tonelson/Shutterstock.com
Blink Charging (NASDAQ:BLNK) is a leading EV charging infrastructure provider that continues to benefit from long-term tailwinds from EV adoption.
Its revenues have grown rapidly over the past several years, and growth rates have held up remarkably well in the current economic climate. However, its bottom-line performance remains a question mark, while its cash base continues to shrink with every passing quarter.
Given the current business environment, the company is exposed to multiple near-term headwinds to raise the stakes. Sales grew by a remarkable 164% in its second quarter to $11.5 million, highlighted by its acquisitions of EB Charging in April and SemaConnect in June.
These acquisitions, though, have left it with a cash balance of just $85.1 million. Moreover, its net losses widened by 67% to $22.6 million, with a sharp increase in operational expenses. Therefore, it’s best to avoid BLNK stock at this time of its near-term troubles and relatively expensive valuation.
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines
Muslim Farooque is a keen investor and an optimist at heart. A life-long gamer and tech enthusiast, he has a particular affinity for analyzing technology stocks. Muslim holds a bachelor’s of science degree in applied accounting from Oxford Brookes University.
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