Despite growing EV demand and supportive government policies, the industry has been struggling with numerous challenges, including supply chain issues, chip shortages, material inflation, and inadequate charging infrastructure. So, considering the headwinds, we think it could be wise to avoid fundamentally weak EV stocks Lucid (LCID), Nikola (NKLA), Faraday Future (FFIE), and Mullen (MULN) this year. Continue reading….
The electric vehicle (EV) industry has witnessed sustained demand in 2022 amid rising fuel prices. According to the International Energy Agency (IEA), it is “expected to see another all-time high for electric vehicle sales, lifting them to 13% of total light-duty vehicle sales globally.” EV sales came to 2 million in the first quarter of 2022, up 75% from the prior-year period.
However, the industry has been grappling with lingering issues such as supply chain and logistic constraints, strict government regulations, and sky-high inflation. Moreover, the semiconductor shortage is holding the industry back as it prevents automakers from meeting pent-up demand for electric vehicles.
Furthermore, the expensive and inadequate charging infrastructure has remained a significant barrier to EV adoption. Although the deployment of charging stations is increasing nationwide, aided by government and corporate investments, customer satisfaction with them is declining.
Satisfaction with public level 2 charging worsened by 10 pointsfrom 643 to 633. Also, satisfaction with DC fast charging stations remained flat at 674 year-over-year.
Hence, fundamentally weak EV stocks Lucid Group, Inc. (LCID), Nikola Corporation (NKLA), Faraday Future Intelligent Electric Inc. (FFIE), and Mullen Automotive, Inc. (MULN) might be best avoided this year.
Lucid Group, Inc. (LCID)
LCID builds and sells electric vehicles (EVs), powertrains, and battery systems. The company sells its products at its own geographically distributed retail and service locations and through direct-to-consumer online and retail sales. It operates more than twenty retail studios in the United States.
LCID lowered its annual production guidance due to lingering supply chain and logistics challenges. The company revised its 2022 production volume outlook to 6,000 and 7,000 vehicles.
Also, LCID entered into a Credit Agreement on June 9. Bank of America Corp. (BAC) is the transaction’s administrative agent and Swingline lender. The revolving credit facility will provide an initial committed amount of up to $1 billion and has a five-year term, maturing on June 9, 2027. The credit facility is expected to increase the company’s loan and interest.
LCID’s total cost and expenses increased 163.6% year-over-year to $656.53 million in the fiscal 2022 second quarter ended June 30, 2022. Its loss from operations worsened by 124.6% from the prior-year period to $559.20 million. Its adjusted EBITDA loss came in at $414.08 million, widening 89.9% year-over-year.
In addition, the company’s just lost and loss per share attributable to common stockholders amounted to $220.43 million and $0.33, respectively. Also, non-GAAP free cash outflow came in at $823.45 million, up 137.4% year-over-year.
The consensus loss per share estimate of $0.31 for the fiscal 2022 third quarter (ended September 2022) indicates a 47.6% widening from the same period in 2021. In addition, analysts expect LCID’s EPS to decline 69.4% per annum over the next five years.
Shares of LCID have declined 36.8% over the past six months and 63.4% year-to-date to close the last trading session at $14.99.
LCID‘s POWR Ratings are consistent with this bleak outlook. The company has an overall rating of F, which translates to a Strong Sell in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
LCID has a grade of F for Value, Quality, and Stability. Within the D-rated Auto & Vehicle Manufacturers industry, it’s ranked #55 or 64 stocks.
To see LCID’s POWR Ratings for Growth, Sentiment, and Momentum, click here.
Nikola Corporation (NKLA)
NKLA is a technology innovator and integrator that develops energy and transportation solutions. The company operates through two segments, including Truck and Energy. It also assembles, integrates, and commissions its vehicles in collaboration with its partners and suppliers.
Last month, the company’s founder Trevor Milton went on trial for securities and wire fraud charges. Milton is accused of allegedly duping investors by making inoperable products look completely functional and of lying about the company’s technology and partnerships.
In the fiscal 2022 second quarter ended June 30, 2022, NKLA’s loss from operations widened 24.5% year-over-year to $172.23 million. Its adjusted EBITDA loss came in at $94.35 million, compared to a loss of $73.91 in the prior-year quarter.
Also, the company’s non-GAAP net loss widened 36.3% from the year-ago value to $104.99 million, while its non-GAAP net loss per share came in at $0.25, worsening 25% year-over-year.
Analysts expect NKLA’s loss per share to widen 37.7% from the prior-year period to $0.54 for the fiscal 2022 fourth quarter (ending December 2022). Furthermore, the consensus loss per share estimate of $1.81 for the current year indicates a widening of 4.5% year-over-year.
NKLA’s stock has declined 63% over the past six months and 63.4% over the past year to close the last trading session at $3.70.
NKLA‘s POWR Ratings reflect its poor prospects. The stock has an overall F rating, equating to a Strong Sell in our proprietary rating system.
NKLA has a grade of F for Quality and Stability and a D for Value. Within the D-rated Auto & Vehicle industry, it is ranked #56 of 64 stocks.
To see NKLA’s POWR Ratings for Growth, Sentiment, and Momentum, click here.
Faraday Future Intelligent Electric Inc. (FFIE)
FFIE designs, develops, manufactures, sells, and distributes electric vehicles and related products in the United States and internationally.
Last month, FFIE was searching for permanent flagship store locations in New York City and Los Angeles. The company targets a flagship store presence in 20 top cities worldwide by 2025. However, it might take a while to benefit from this long-term project.
For the second quarter of fiscal 2022 ended June 30, 2022, FFIE’s operating loss widened 389.3% year-over-year to $137 million. Its net loss came in at $142 million, deteriorating 167.9% year-over-year. The company’s total assets came in at $588 million as of June 30, 2022, compared to $706.06 million as of March 31, 2022.
Analysts expect FFIE’s loss per share for the ongoing quarter (ending December 2022) to worsen by 288.9% year-over-year. Also, the company’s loss per share for the fiscal 2022 and 2023 is expected to come in at $1.63 and $1.30, respectively.
The stock has slumped 33.7% over the past month and 92.1% over the past year to close the last trading session at $0.65.
FFIEs poor fundamentals are reflected in its POWR Ratings. The stock’s overall rating of F equates to a Strong Sell in our proprietary rating system.
FFIE has an F grade for Value, Stability, and Quality. It has a D grade for Sentiment. Within the same industry, it is ranked #58 of 64 stocks.
Click here to access FFIE’s additional POWR Ratings (Growth and Momentum).
Mullen Automotive, Inc. (MULN)
MULN is an electric vehicle company that manufactures and distributes electric vehicles. In addition, the company operates CarHub, a digital platform that leverages AI to provide an interactive solution for buying and selling a car. It also offers battery technology and emergency point-of-care solutions.
For the fiscal 2022 quarter that ended June 30, 2022, the pre-revenue company reported a loss from operations of $18.22 million, widening 184.5% year-over-year. MULN’s net loss worsened 289.9% from the prior-year period to $59.47 million, while its net loss per share came in at $0.16.
As of June 30, 2022, MULN’s current and total liabilities were $58.52 million and $65.11 million, respectively. In addition, cash outflows from operating and investing activities came in at $128.51 million and $11.27 million for the nine months that ended June 30.
Shares of MULN have plummeted 87.5% over the past six months and 95.6% over the past year to close the last trading session at $0.34.
MULN’s POWR Ratings reflect this weak outlook. It has an overall rating of F, which translates to a Strong Sell in our proprietary rating system.
It has an F grade for Value and Stability and a D for Sentiment and Quality. Within the same industry, it is ranked #57 out of 65 stocks.
To see MULN’s POWR Ratings for Growth and Momentum, click here.
LCID shares fell $0.01 (-0.07%) in premarket trading Thursday. Year-to-date, LCID has declined -60.68%, versus a -19.98% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
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