The road to full electrification still has a long way to go. The EV market has struggled since last year, and some companies have been forced to close their shops. The declining demand for EVs has created an ever-increasing list of EV stock nightmares to avoid. That’s why I looked at which companies are posing a threat of further losses.
I examined three companies involved in electric vehicle production, struggling to meet obligations based on their current ratio. To come up with the list, I screened for the following criteria:
- Operates at a net loss,
- A current ratio of less than 1.
A current ratio represents a company’s ability to pay its debts in the short term. A number lower than 1 means the company is unlikely to be solvent if all its debt becomes due at once within the next year, as their cash and cash-like securities would not cover it.
I arranged the following companies based on the current ratio, from highest to lowest.
Arcimoto (FUV)
Known for its fun utility vehicle, Arcimoto (NASDAQ:FUV) is a designer and manufacturer of electric vehicles. The company has six main products built and sold on its platform focused on niche markets. This includes:
- Fun Utility Vehicle: its flagship product for everyday consumer trips,
- Deliverator: aimed for general fleet utility,
- Rapid Responder: built for security and emergency services,
- Cameo: a sports and film influencer vehicle,
- Arcimoto Roadster: an on-road 3-wheel electric vehicle, and
- Flatbed: a right-sized pickup truck.
While we wait for Arcimoto’s expected financial release in May 2024, let’s examine its latest financials.
Revenue decreased 45% in Q3’23. While earnings improved significantly due to cost-saving measures, the company still ended at a $1.58 loss per share.
The company is also heavily leveraged, with a debt-to-equity ratio of 5.39 and a current ratio of 0.46. Furthermore, Arcimoto’s production is hindered by its reliance on a single battery supplier.
Even with a business aligning with the global shift to an eco-friendly economy, its hurdles, heavy reliance on debt, and continued loss make it one of the EV stocks to avoid.
Faraday Future Intelligent Electric (FFIE)
If we are talking about EV stocks to avoid, you may have heard of Faraday Future Intelligent Electric Inc. (NASDAQ:FFIE). It is a testament to why the stock market is not just an avenue to build wealth but can also be a place to destroy it.
The stock has nosedived from $100 to $0.59 cents, almost wiping out anyone who bought from the top and held on until now. It’s currently in a desperate flight to claw back up to $1.00 and avoid delisting due to Nasdaq’s non-compliance notice.
Besides its scary price performance and the possibility of delisting, its financials are even more alarming.
Faraday has significant losses and cash burn, which can lead to uncertainties in its sustained operability.
Its current ratio, which indicates its ability to meet its short-term obligations, is only 0.23, highlighting its current issues with operational stability.
In addition, Faraday competes in the luxury EV market, which pits it against industry heavyweights that can continue the fight in the long haul. If you have FFIE stock in your portfolio, maybe now’s a good time to run away and jump onto other EV stocks instead and away from these EV stock nightmares.
Canoo (GOEV)
Known for its Multi-Purpose platform, Canoo (NASDAQ:GOEV) is a mobility technology company specilizing in developing and building electric vehicles. Canoo also develops its own proprietary software tools that help aggregate Canoo and non-Canoo car data to provide valuable insights to its customers. Its list of EVs includes:
- Lifestyle Vehicle,
- Lifestyle Delivery Vehicle,
- Multi-Purpose Delivery Vehicles (MPDV), and
- Pickup
Unfortunately, the company has previously disclosed its doubts about its future and will try to use debt to fund operations if needed.
While Canoo ended the year with improved adjusted EBITDA, its financials still paint a gloomy picture. The company is still struggling to reach profitability, with FY’23’s losses reaching $302.6 million.
The company’s outlook has also disappointed analysts as it projects modest revenue for 2024, indicating financial constraints and raising doubts about continuing operations.
Canoo’s current ratio stands at 0.18, which highlights its liquidity and inefficiencies in the short term. The company also did a reverse stock split on March 8, 2024, to comply with Nasdaq’s minimum trading price of $1.00. With challenges in the market and abysmal performance, investors are better off selling GEOV and seeking other EV stocks instead. Make sure you avoid these EV stock nightmares.
On the date of publication, Rick Orford did not have (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.
