Like other speculative growth plays, most electric vehicle, or EV stocks, peaked in price at some point in 2021. Since then, most companies operating in this fast-growing sector have declined substantially in 2022. That said, while it may appear to some investors that this is a sector worth considering as it may have bottomed out, plenty of names in this space still belong in the “EV stocks to sell” category.
Indeed, despite what many have called a bubble in the EV sector seemingly popping, scores of publicly-traded electric vehicle stocks continue to trade at extremely high valuations. Along with rich valuations, these vehicle electrification plays are also facing deteriorating fundamentals.
Growth is falling short of expectations, milestones aren’t being met, and the hope and hype that sent this sector to “the moon” during the pandemic era continues to dissipate.
Thus, investors shouldn’t get taken for a ride with these overpriced EV stocks to sell. With weakening fundamentals, there’s more room for most of these stocks to fall. Thus, I think investors want to hit the brakes with these EV companies right now.
There was a lot of buzz surrounding EV charging solutions provider ChargePoint (NYSE:CHPT) in the lead up to its debut in the public markets via a special purpose acquisition company (or SPAC) merger in February 2021.
In fact, even before the SPAC merger closed, shares in CHPT’s “blank-check” predecessor, Switchback Energy, surged to levels that were nearly five-times higher than its original SPAC price ($10 per share). Since then, however, CHPT stock has all but fallen back to this initial SPAC price, changing hands today for around $11 per share.
Still, I wouldn’t assume that the $10 level is any sort of floor for ChargePoint. Although the company reported 93% revenue growth last quarter, it remains far away from reaching profitability any time soon. Expected to burn through half of its cash position over the next twelve months, CHPT stock may continue to slide lower, as unprofitable growth stocks continue to fall out of favor.
Canoo (NASDAQ:GOEV) shares have taken a 83.5% haircut so far in 2022, but this early-stage maker of electric delivery vehicles has actually made major progress throughout this year. Namely, the company has received some large orders for its vehicles from high-profile customers, including the likes of Walmart (NYSE:WMT).
So, why has GOEV stock taken such a big dive since January? Blame it on shareholder dilution. As Louis Navellier discussed back in October, this cash-starved startup needs capital in order to fulfill these orders. The company has continued to raise this cash through the dilutive sale of new shares.
Based on its latest Securities and Exchange Commission (or SEC) filings, it’s clear that Canoo continues to lean on this financing source. Future equity raises will limit how much GOEV stock will be ultimately worth on a per-share basis (if it ever becomes profitable). Thus, for long-term investors, this is a dilution story that’s worth avoiding, as a further sharp decline in price may be in store.
Hyzon Motors (HYZN)
A rich valuation and poor fundamentals aren’t the only reason why Hyzon Motors (NASDAQ:HYZN) is among the top EV stocks to sell. The question of whether things are really on the up-and-up with this company is another big concern as well.
This year, HYZN stock was one of several stocks hit by scandal and controversy. Not only did Hyzon find itself the target of an SEC investigation, but the company itself stated that past financial statements “cannot be relied upon.” Additionally, despite releasing new figures, these more recently-released numbers aren’t exactly much to get excited about.
In the first quarter of 2022 (the last period in which HYZN has provided quarterly figures), the company reported a $26.8 million operating loss, on just $356,000 in revenue. With the situation possibly getting materially worse since then, going against the grain and buying HYZN stock today appears to be a move that will ultimately end in tears.
Lucid Group (LCID)
A year ago, Lucid Group (NASDAQ:LCID) appeared poised to eventually grab a large share of the premium EV market. Flash forward to today, and the company’s prospects have diminished considerably. Initially, due to production headwinds, Lucid announced some significantly reduced production targets.
More recently, the company slashed its targets due to quarterly results falling short of expectations, and a drop in reservations for its vehicles. Accordingly, while LCID stock has plunged from the $40 level to the single-digits following this year’s developments, an additional pullback may lie ahead.
In the coming quarters, if Lucid fails to start meeting/beating expectations, it’ll be difficult for the company to maintain its now-lowered, but still-lofty valuation. The stock continues to trade at a high price-to-sales ratio (nearly 20-times). Although possibly worth another look if the company ends up cratering to penny stock price levels (under $5 per share), for now, I think passing on LCID is the best move.
Zooming over 30% higher in the past month, many investors may think Nio (NYSE:NIO) has once again become one of the EV stocks to buy. However, I don’t think it’s time to dive in. This China-based electric vehicle maker remains one of the top EV stocks to sell, as this latest rally could soon reverse course.
Sure, the big jump in Nio’s stock price over the last month has been driven by promising news. The company reported a record number of vehicle deliveries in November. China also appears keen on easing on its “Zero Covid” policy, which has hit both production and demand for Nio’s vehicles.
Even so, as one Seeking Alpha commentator recently argued, this big increase in November may be due to China’s EV tax incentives expiring this year. If this proves true, and sales growth sputters again starting in 2023, shares could return to sub-$10 per share prices.
After its SPAC merger in late-2020, EV battery technology startup Quantumscape (NYSE:QS) skyrocketed to prices well over $100 per share. Presently, investors can buy this same stock at around $7 per share.
That said, those who think this means QS stock is now in oversold territory should think otherwise. Shares in this company, which is at work developing lithium solid state batteries (or SSBs) for electric vehicles, may keep dropping, as time is not on its side.
At least, that’s the view of Morgan Stanley’s Adam Jonas. In November, the analyst downgraded shares from “hold” to “sell,” and lowered his price target from $12 to $4 per share. This downgrade appears to be mostly due to the fact that QuantumScape’s timeline to commercialization is far too long. Years away from reaching its next commercialization hurdle, rising interest rates and high operating losses are likely to apply more pressure to the stock.
Tesla (NASDAQ:TSLA) is still not only the most valuable EV stock by market cap, but also the most valuable automaker by market cap (for now). However, TSLA has fallen more than 50% from its all-time high, and could be at risk of falling further.
Globally, competition in the EV sector is heating up. Incumbent automakers and “Tesla killers” alike in the U.S. are moving quickly to grab their piece of the electric vehicle market. Tesla could also be facing big issues in China, where it is rumored to be pulling back on production.
Worse yet, with CEO Elon Musk preoccupied with his latest personal acquisition (Twitter), these factors could have even more of a negative impact than they would if Musk were fully focused on keeping this EV powerhouse at the top of the heap. Investors may want to follow the hedge fund community’s lead, and put TSLA stock in the EV stocks to sell bucket.
On the date of publication, Thomas Niel did not hold (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.