Government support of electric vehicle (EV) production and plans to phase out fossil-fuel-powered vehicles over the next decade have made the EV industry a highly coveted one among investors. Investor optimism about the sector is evident in the KraneShares Electric Vehicles and Future Mobility Index ETF’s (KARS) 48.6% returns over the past nine months compared to the SPDR S&P 500 ETF Trust’s (SPY) 25.7% gains.
However, the industry’s rising popularity has allowed the entry of several start-ups with paltry product portfolios and inadequate technological prowess to gain substantially through aggressive advertising. Moreover, a global semiconductor chip shortage has delayed product launches and/or deliveries for most companies over the past couple of months, rendering their current stock price levels unsustainable.
Against this backdrop, we think it's wise to now avoid fundamentally weak EV stocks Nikola Corporation (NKLA), Blink Charging Co. (BLNK), and Lordstown Motors Corp. (RIDE). These stocks are currently trading at high valuations and could retreat in the near-term.
Click here to checkout our Electric Vehicle Industry Report for 2021
Nikola Corporation (NKLA)
NKLA operates as a zero emissions transportation and infrastructure solution provider. The company designs and manufactures battery-electric and hydrogen-EVs, EV drivetrains, vehicle components, energy storage systems, and hydrogen fueling station infrastructure.
On May 6, 2021, NKLA announced a collaboration with Total Transportation Services Inc. (TTSI), a port trucking company in South California, to expedite zero-emissions transportation at the port of Los Angeles/Long Beach. TTSI is having problems with smog-causing nitrogen-oxide emissions. TTSI has signed a Letter of Intent (LOI) to order 100 Nikola Class 8 battery-electric vehicle (BEV) and fuel-cell electric vehicle (FCEV) semi-trucks. Delivering operational efficiency and zero-emissions, NKLA’s vehicles are expected to contribute significantly to TTSI’s sustainability and zero-emissions trucking goals.
For the first quarter ended March 31, NKLA's loss from operations increased 276.9% year-over-year to $120.59 million. The company’s non-GAAP net loss came in at $56.04 million for the quarter, which represents a 76.1% year-over-year rise. NKLA’s non-GAAP loss per share increased 16.7% year-over-year to $0.14. As of March 31, 2021, NKLA had cash and cash equivalents of $763.75 million.
Analysts expect NKLA’s EPS to remain negative in the remaining quarters of 2021. NKLA’s valuation ratios are much higher than its peers. In terms of its forward EV/Sales, NKLA’s 328.04x is 16378.1% higher than the 1.99x industry average. In terms of forward Price/Sales also, , the stock is currently trading higher than the industry average (367.91x versus 1.63x).
NKLA has lost 73.1% over the past year and 51.9% over the past nine months. It closed yesterday’s trading session at $17.21. Wall Street analysts expect the stock to hit $16.40 in the near term, which indicates a potential 4.7% downside.
It’s no surprise that NKLA has an overall F rating, which equates to Strong Sell in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
The stock also has an F grade for Stability, Value and Quality, and a D grade for Growth and Sentiment. Click here to see the additional POWR Ratings for NKLA’s Momentum.
NKLA is ranked #56 of 57 stocks in the Auto & Vehicle Manufacturers industry.
Click here to check out our Automotive Industry Report for 2021
Blink Charging Co. (BLNK)
BLNK is provides EV charging equipment and networked EV charging services. The company’s cloud-based software, the Blink Network, operates, maintains and tracks all its EV charging stations and the associated charging data. It offers its services through a field sales force and reseller partners and sells home unit chargers through various internet channels.
BLNK announced the acquisition of a European EV charging operator Blue Corner N.V., and its portfolio of 7,071 charging ports and a robust European charging network on May 11. According to ev-volumes.com, sales of plug-in electric vehicles in Europe rose 137% to 1.4 million vehicles last year, whereas U.S. sales rose 4% to 328,000. Therefore, this acquisition enables BLNK to capitalize on surging EV adoption in Europe.
BLNK’s financials are also not promising. In the first quarter ended March 31, BLNK’s gross profit decreased 68.8% year-over-year to $96,379. The company’s loss from operations came in at $7.39 million, which represents a 144.7% rise from the prior-year period. While its net loss increased 148.7% year-over-year to $7.36 million, its loss per share increased 63.6% year-over-year to $0.18. The company had $195.7 million in cash and cash equivalents as of March 31, 2021.
Analysts expect the company’s EPS to remain negative for the coming quarters. In terms of forward EV/Sales, BLNK is currently trading at 124.19x, which is 7422.2% higher than the 1.65x industry average. And in terms of its forward Price/Sales, the stock is currently trading at 149.78x, 11006.3% higher than the 1.35x industry average.
The stock has lost 4% year-to-date and closed yesterday’s trading session at $41.05. Wall Street analysts expect the stock to hit $38 in the near term, which indicates a potential 7.4% downside.
BLNK’s poor prospects are also apparent in its POWR Ratings. The stock has an overall F rating, which equates to Strong Sell in our proprietary rating system.
The stock has an F grade for Growth, Stability, Value and Quality, and a D grade for Sentiment. In addition to the POWR Ratings grades we’ve just highlighted, one can see BLNK ratings for Momentum here.
The stock has a very low rank in the B-rated Industrial - Equipment industry.
Click here to check out our Industrial Sector Report for 2021
Lordstown Motors Corp. (RIDE)
RIDE is an automotive company that designs and manufactures light-duty electric trucks targeted for sale to fleet customers. The company’s integrated software monitors and adjusts each wheel, and its telematics system provides owners with a range of data for fleet management. The company’s Lordstown Endurance vehicle is a popular electric pick-up truck.
On behalf of RIDE investors, The Shareholders Foundation, Inc. filed two lawsuits against certain directors and officers of RIDE today. The plaintiffs allege that the defendants failed to disclose that the company’s purported pre-orders for Lordstown Endurance were non-binding and that the first test run of the Lordstown Endurance led to the vehicle bursting into flames within 10 minutes and the company has not been "on track" to commence production of the Endurance in September 2021. Also, the resignation of RIDE’s CEO Steve Burns and CFO Julio Rodriguez is likely to cause confidence in RIDE in the near-term.
For the first quarter ended March 31, RIDE’s loss from operations increased 785.8% year-over-year to $106.21 million. The company's net loss came in at $125.21 million, up 955.3% from the prior-year period. Its loss per share is reported at $0.72, which represents a 350% year-over-year rise. The company had $587.04 million in cash and cash equivalents as of March 31, 2021.
Analysts expect the company’s EPS to be negative in 2021. RIDE’s valuation ratios are much higher than its peers. In terms of forward EV/Sales, RIDE’s 23.84x is 1343.7% higher than the 1.65x industry average. Its 27.28x forward Price/Sales is 1922.8% higher than the 1.35x industry average.
RIDE has lost 51.3% over the past six months and 37.4% over the past three months. The stock ended yesterday’s trading session at $9.26. The stock is expected to hit $9 in the near-term, which represents a potential 2.8% downside.
RIDE’s POWR Ratings are consistent with this bleak outlook. The stock has an overall F rating, which equates to Strong Sell in our proprietary rating system.
The stock has an F grade for Growth, Stability, Value and Sentiment, and a D grade for Quality. We have also graded RIDE for Momentum. Click here to access all RIDE ratings.
RIDE is ranked #54 of 57 stocks in the Auto & Vehicle Manufacturers industry.
Click here to checkout our Electric Vehicle Industry Report for 2021
NKLA shares were trading at $15.53 per share on Tuesday afternoon, down $1.68 (-9.76%). Year-to-date, NKLA has gained 1.77%, versus a 13.99% rise in the benchmark S&P 500 index during the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market.
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