Electric vehicle (EV) companies are likely going to face a significant challenge in the upcoming months. Inflation, while slowing, is still choking investors and consumers alike and remains a key concern for the Federal Reserve’s economic policy. The premium price of a new car (used cars don’t directly impact a company’s revenue, so they aren’t factored in) eliminates many potential buyers. Additionally, ever-increasing unemployment is causing further turmoil, with fears of a recession rising.
This cut on discretionary expenditures will affect many companies, but because most EV companies are currently still emerging and aren’t well established, it remains to be seen whether they’ll be able to weather a significant economic downturn. The upcoming weeks will be extremely volatile, especially as significant economic decisions, such as a rate cut, are expected to be coming. As the market prices in current macroeconomic data, here are three EV stocks to sell.
Tesla (TSLA)
Tesla (NASDAQ:TSLA) is synonymous with the EV industry. It is undoubtedly the company that caused EVs to go mainstream, with many competitors popping up later. However, revenue has started to fall, and guidance is falling too. The company has missed all four of the last earnings estimates, and the stock is down 24% over the last month.
TSLA’s financials are rapidly slipping. While year-over-year quarterly revenue has grown by 2.3%, the overall earnings are still negative, at -45.3%. Additionally, a beta of 2.31 makes it a highly volatile stock. With how earnings are slipping, significant drops in the future are possible. However, there are notable positive catalysts that will be released soon, including the robotaxi feature, Optimus (Tesla Bot). While they have likely been priced in, this makes TSLA stock something to watch closely.
Analysts are projecting an implied upside of merely 6%. This suggests that this once magical company has slid, and it is time for current investors to take a profit while they can.
Lucid Group (LCID)
Lucid Group (NASDAQ:LCID) designs and manufactures luxury EVs, focusing on high-performance, long-range cars like the Lucid Air. The company also explores energy storage solutions, leveraging its advanced battery technology beyond automobiles to expand into the broader energy sector.
LCID stock has been down 55% over the past year, and it doesn’t look like it’s going up anytime soon. The company has atrocious financials, with an operating margin of -382.48% and an operating cash flow of -$2.01 billion. Lucid has missed its EPS predictions over the past two quarters with an average surprise of -18.55%, indicating problems in profitability. The company hasn’t been profitable since its inception because delivery numbers remain too low to reach profitability. The company’s losses are expected to rise, especially with upcoming production expenses for new models.
The company has been spending substantial amounts on research, development and production ramp-up, leading to a rapid depletion of its cash reserves. The Saudi investment is unlikely to sustain it indefinitely. All these factors make LCID an EV stock to sell.
Nikola (NKLA)
Nikola (NASDAQ:NKLA) is an American company that designs and manufactures zero-emission vehicles, primarily focusing on hydrogen fuel cell electric vehicles (FCEVs) and battery-electric vehicles (BEVs) for the commercial trucking industry. The company also aims to build out a hydrogen refueling infrastructure to support its fuel cell trucks.
NKLA stock is trading at $7.33 as of the market close on 08/07, with a market cap of $331.4 million. The company has been increasing its losses each year. Nikola recorded a revenue of $35.84 million in 2023, with a loss of -$966.2 million in the same year. The company isn’t anywhere close to being profitable, with its operating margin being -1,938.95% and an operating cash flow of -$453.76 million.
The company also has a relatively high beta of 2.09, which indicates twice the volatility of the overall market. The reason for the company’s terrible financials is, in part, due to the small market of EV trucks. Plus, competitors, such as Tesla and Rivian (NASDAQ:RIVN), have already established themselves, leaving Nikola playing catch-up in a highly competitive industry. Terrible financials, depleting cash reserves and a diminishing market make Nikola one of the EV stocks to sell.
On the date of publication, Achintya Pasricha 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.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
