Governments worldwide are accelerating the shift of their economies toward carbon-neutral energy sources. The concomitant increasing switch by consumers to EVs is expected to revolutionize the global automotive industry. However, with several new entrants seeking to capitalize on bullish sentiment toward the industry, the EV space has become overcrowded. So, investors should be judicious in picking the best companies to ride the industry’s growth.
Many of the newly launched EV companies are currently surging based on investor speculation, absent fundamental support.
With negligible sales revenues, EV stocks Velodyne Lidar, Inc. (VLDR), Hyliion Holdings Corp. (HYLN) and Kandi Technologies Group, Inc. (KNDI) are highly speculative investment bets. So, investors should stay away from these stocks for now.
Velodyne Lidar, Inc. (VLDR)
VLDR is known worldwide for its broad portfolio of lidar technologies that meet the needs of a wide range of industries, including autonomous vehicles, robotics, unmanned aerial vehicles (UAV), smart cities and security. The company offers directional sensors, close-range sensors and software solutions.
VLDR announced a multi-year sales agreement with Emesent this month to provide it with Puck LITE sensors for mobile mapping systems. Recently, VLDR collaborated with Beijing Trunk Technology Co. Ltd. to develop next-generation autonomous heavy trucks and to accelerate the commercialization of driverless trucks in China’s logistics market.
However, despite these positive developments, the company’s results for the third quarter ended September 30, 2020 were far from impressive. VLDR incurred a non- GAAP net loss of $9.10 million, with a $0.06 loss per share. Its operating loss for the three-month period amounted to $2.74 million.
Moreover, reduced production capabilities at its manufacturing sites over the fourth quarter, owing to a COVID breakout in the San Jose factory, impaired the company’s ability to fulfill some of its customers’ orders in December.
While VLDR’s proprietary technology seems promising, no evidence of the efficacy of its autonomous driving technology is currently available. This, combined with declining prices over the past couple of months, makes VLDR an extremely risky investment currently . Thus, we think it is advisable to wait for the launch of at least a prototype of its state-of-the-art technology and its integration with EVs before investing in the stock.
Analysts expect VLDR’s EPS to rise at a CAGR of 54.9% over the next five years. A consensus revenue estimate of $123.03 million for the fiscal 2021 ending December 31 represents a 29.6% rise from the year-ago value. However, it will take some time for the company to become profitable.
VLDR’s POWR Ratings are consistent with this bleak outlook. It has an overall rating of Neutral with a C for Buy & Hold Grade and a D for Peer Grade. Within the Industrial - Machinery Industry, it is ranked #66 of 91 stocks.
Hyliion Holdings Corp. (HYLN)
HYLN develops and markets electrified powertrains for the commercial vehicle industry. It also provides battery management systems for hybrid and fully electric vehicle applications. The company recently went public via a SPAC, Tortoise Acquisition (SHLL), in a deal worth more than $500 million.
HYLN had initially claimed that its technology would improve the fuel efficiency of its trucks by up to 30%. However, On October 16h Bonitas Research characterized the company’s fuel efficiency claims as a lie. An external test of HYLN’s technologies by PAM Transportation Services was performed, which found only “a small percentage” improvement in fuel efficiency.
HYLN has reported zero revenue to date. The company net loss has increased 77.2% from the year-ago value to $20 million for the nine-month period ended September 30, yielding a loss per share of $0.76, up 68.9% year-over-year.
Analysts expect HYLN’s EPS to rise 27.7% in fiscal 2021 ending December 31. The stock has lost 5% over the past six months and is currently trading 69.2% below its 52-week high of $58.66.
HYLN poor prospects are also apparent in its POWR Ratings, which accord it a Sell rating. It also has an F for Trade Grade and Buy & Hold Grade, a D for and Peer Grade, and a C for Industry Rank. It is ranked #22 of 22 stocks in the Trucking Freight Industry.
Kandi Technologies Group, Inc. (KNDI)
KNDI is a China-based company engaged principally in the development, production and distribution of EV products, EV parts and off-road vehicle products. The company operates four business lines – the development and sale of pure electric automobiles, electric vehicle parts, intelligent battery swapping systems, and all-terrain vehicles.
A class action lawsuit was filed against KNDI by various law firms over the past couple of months. The plaintiffs alleged that KNDI had artificially inflated its reported revenues through undisclosed related party transactions and had relationships with key customers that indicated the lack of arm's-length transactions with KNDI. This has caused a lot of instability and disruption in the normal functioning of the business, which was already negatively affected by the spread of COVID-19.
In November, short-seller firm Hindenburg Research released a scathing report that accused the company of faking sales to raise $160 million from U.S. investors. In the report, the firm found that almost 64% of KNDI’s sales over the last year have been to undisclosed related parties. A day later, KNDI issued an initial response to the allegations, saying it believes the report “contains numerous errors, misstatements of historical facts, inaccurate conclusions, and superfluous opinions.”
KNDI’s net revenues have decreased 40.9% year-over-year to $18.70 million in the third quarter ended September 30, 2020. This was due primarily to a decrease in EV parts sales by 67.4%. The company reported a net loss of $1.5%, up 112.1% from the year-ago value.
A consensus revenue estimate of $77.60 million for the fiscal 2020 ending December 31 represents a 42.8% decrease year-over-year. Though the stock has gained 125.4% over the past year, it is currently trading 46.6% below its 52-week high of $17.45.
KNDI is rated a Sell in our POWR Ratings system. It has a C for Trade Grade, an F for Buy & Hold Grade, and a D for Peer Grade. It is currently ranked #67 of 103 stocks in the China industry.
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VLDR shares rose $0.38 (+1.64%) in after-hours trading Thursday. Year-to-date, VLDR has gained 1.67%, versus a 1.00% rise in the benchmark S&P 500 index during the same period.
About the Author: Rishab Dugar
Rishab is a financial journalist and investment analyst. His investment approach is to focus on quality stocks, trading at low prices, with business models that he readily understands.
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