Tesla disappoints investors … how Louis Navellier is sizing up the EV space … Luke Lango says to watch for new government regulations … where Eric Fry is finding opportunities
Yesterday, Tesla took it on the chin as investors didn’t like the electric vehicle manufacturer’s earnings report.Here’s CNBC:
Tesla shares fell more than 8% after the company reported a more than 20% drop in both earnings and net income compared with the year-ago quarter.Analysts also expressed worry over continued price cuts, a prospect that CEO Elon Musk suggested was “the right choice” for Tesla.
Let’s jump to legendary investor Louis Navellier, editor of Growth Investor:
Because [Tesla] is cutting prices – they cut prices six times this year, and Mr. Musk said he’s going to cut prices more – he’s really having an impact on the entire EV industry.Lordstown Motors is about to be de-listed by the Nasdaq. Rivian is not going to make it in my opinion. Rivian is definitely in trouble. Nice truck, but it looks like they won’t reach economies of scale. Same thing with Lucent. Beautiful car, but probably won’t be able to obtain enough batteries to, again, reach economies of scale. Some of it is due to the battery shortage, some of it is just due to price competition. Tesla’s moves have even hurt Ford and GM. So, it’s getting to be very interesting out there in the EV world. I guess the real question is “is anybody making money?”
The competition in the EV space has become so challenging that Louis just called out three EV stocks to dump from your portfolio today
It wasn’t long ago when the entire EV sector was booming for investors. But as competition grows fiercer and consumers increasingly feel pinched, that’s changing.You can click here to read the full article, but let’s highlight Louis’ analysis of Rivian since he mentioned it above:Last week, in his free newsletter Market 360, Louis wrote “7 Underperforming Stocks to Dump Now”. Of those seven stocks, three were electric vehicle stocks: NIO, Rivian, and Fisker.
Another electric vehicle company that looked to go head-to-head with Tesla, Rivian Automotive (NASDAQ:RIVN) is headed in the wrong direction. The stock price is down 66% in the last year and 30% in 2023.Part of the problem is what UBS analyst Patrick Hummel calls an automotive glut that threatens automakers in the U.S. Automakers are increasing production but demand for vehicles is decidedly cooler.
Louis also notes that Rivian is having trouble manufacturing their vehicles for customers who want them. The company has stated its goal is to produce 50,000 vehicles this year, but during the first quarter, it could only churn out 9,395.Finally, as an investor who focuses on quantitative strength, Louis takes it back to the numbers. He points out that Rivian is hemorrhaging cash:
It’s guiding for losses in 2023 to continue, similar to 2022 when Rivian lost $5.2 billion.RIVN stock has a “D” rating in the Portfolio Grader.
Now, with so many EV manufacturers in trouble, which one does Louis believe can outperform in this cut-throat market?Let’s jump back to Louis’ Special Market Update podcast from yesterday:
If there’s one automotive company that I think can fight, it’s probably Porsche, only because it’s a luxury goods company. It still has fat operating margins. It’s going to be launching a lot of EVs soon.The only thing about Porsche I worry about it they’re going to ask 15% more for their EVs than for their internal combustion vehicles, and I’m not sure everybody’s going to want to pay that premium. We’ll see. It’s going to get very interesting out there in the electric vehicle (EV) world.
For a crystal ball peek at which other EV makers might find their way to the top of the sector, Luke Lango suggests we monitor recent government EV regulations
For newer Digest readers, Luke is our hypergrowth expert and the editor of Innovation Investor. Let’s jump to his analysis from earlier this week:
When President Joe Biden took control of the White House in 2021, he promised to change America’s automotive industry forever.Those promises are now becoming a reality through a flurry of new regulations introduced over the past few months. Together, these regulations promise to reshape not just the U.S. automotive industry but, specifically, the electric vehicle (EV) industry as well. In fact, given these new requirements, companies you thought were going to win the EV Race may not win after all. And companies that didn’t stand a chance a few years ago could now become the new titans of the EV industry.
Luke points toward two major pieces of pending legislation that have the potential to reshape America’s auto industry over the next 10 years. The first has to do with EV tax credits, the second involves EPA tailpipe regulations.As to the tax credit regulation, Luke explains that for years, the U.S. government has incentivized the purchase of electric vehicles via tax credits. These credits were rather broad and applied to a wide-range of vehicles. This is now changing. Here’s Luke to explain:
…Over the past few months, the U.S. Treasury Department has been working tirelessly to redefine the nature of EV tax credits to incorporate the origin of EV materials into the calculation…In short, the U.S. Treasury Department is ensuring that only fully “made-in-America” EVs get the full tax credit. Everything from battery mineral extraction to EV assembly must be done in the U.S. or an allied nation in order for that EV to get the full $7,500 tax break.
By the way, guess which EV maker doesn’t meet this standard?It turns out, it’s Rivian, the same EV manufacturer that Louis just called out as a stock to dump from your portfolio immediately. Luke notes that Rivian’s signature pick-up truck, the R1T, and its signature eSUV, the R1S, don’t qualify for the tax credit under these laws.
What about the new EPA regulations and their impact on the EV sector?
Here’s Luke to explain what’s happening:
These regulations – announced last Wednesday in Detroit – target tailpipe emissions. Specifically, they put a new mandate on fleet-wide emissions of various greenhouse gasses.And of, course, the biggest piece of these developments is a new carbon dioxide emission mandate. The EPA is mandating that all fleets reduce carbon emissions to 82 grams per mile by 2032, which is about 75% lower than the 347 grams per mile of CO2 emissions that fleets averaged in 2021.
The EPA believe this will accelerate EV adoption in the U.S. Whereas the government was previously targeting ~50% EV adoption by the early 2030s, the EPA now believes these regulations put us on a path to ~60% EV adoption over the same period.But while this may speed up the EV transition, it will also serve as a sifting agent within the EV sector itself. Here’s Luke on that point:
…This new legislation could inject steroids into the EV Race.The already extremely-fast adoption of electric vehicles in the U.S. will become even faster, creating EV stock winners – and losers – faster than ever before, too.
So, which EVs are doing well from a straight “numbers” perspective?Luke offers a few names:
Audi’s EV sales rose 37% last quarter.Ford’s EV sales rose 41%. Mercedes registered 142% growth in EV sales last quarter. Lucid reported nearly 200% growth. Volkswagen reported over 250% growth. BMW registered 442% growth.
Finally, Eric Fry comes full circle to Tesla, the growing number of lower-cost EVs today, as well as the “onshoring” of EV manufacturing lines
Eric is our macro expert and the editor behind Investment Report. From his update yesterday:
There’s no need to obsess about Tesla and the company’s future and its eccentric leader, when the EV sector is offering so many other ways to play the EV trend.But I do expect several companies to start outperforming Tesla in 2023 and beyond – by making a market-beating advance, as Tesla’s lavish valuation continues to shrivel. There are a lot of compelling reasons to look elsewhere for an EV, not the least of which is the Tesla Model 3’s base price of around $41,990. There are at least three EV base models currently priced at $30,000 – the Chevrolet Bolt, Bolt EUV, and Nissan Leaf.
Speaking of Nissan, Eric notes that the company just built an EV battery plant in Smyrna, Tennessee. It’s just one example of a snowballing number of companies that mainly do business overseas that are bringing their operations to the United States.Here’s Eric’s quick take:
Electric vehicles and all of its related sectors are coming home… and with that, comes unbelievable wealth-growing opportunities. You don’t have to look far to capitalize on this megatrend, but I suggest you start now.Get all the details here – including one of my top picks in the EV sector, absolutely free.
Coming full circle…
While Tesla’s earnings left many investors disappointed, the EV sector is going to make well-positioned investors quite a bit of money this decade – even though cutthroat competition demands greater selectivity than in the past.Here’s a quick summation of our analysts’ broad take today: Think twice about Tesla, and certainly Rivian… Check out Porsche, as well as the EV-makers that will benefit from EV tax credits and recent EPA regulations… And keep an eye on EV manufacturers with lower-priced models, as well as the companies that are reducing supply chain costs by bolstering their production infrastructure here in the U.S. Have a good evening, Jeff Remsburg