The year 2020 saw unprecedented investor interest in the electric vehicle (EV) industry as governments worldwide announced several initiatives to address climate change concerns. The overall prospects of the global EV market look promising, with massive opportunities for growth in the battery, hybrid, and plug-in-hybrid fields. Indeed, according to a Meticulous Research report, the EV market is expected to grow at a 33.6% CAGR over the next six years.
However, the production costs for EVs are increasing in-part because of a global semiconductor chip shortage. This, along with the industry’s overvaluation, is dampening investor interest in the EV space. This is evidenced by the Krane Shares Electric Vehicles and Future Mobility Index ETF’s (KARS) 1.3% loss over the past three months versus the SPDR S&P 500 Trust ETF’s (SPY) 10.4% gains over the same period.
There is also intense competition in the EV industry, with several new entrants vying for market share. Given this backdrop, we think it’s wise to stay away from Arrival Limited (ARVL), Blink Charging Co. (BLNK), and Workhorse Group Inc. (WKHS) because their near-term prospects look bleak.
Based in Howald, Luxembourg, ARVL is focused mainly on the production of commercial electric vehicle vans and buses. It has operations across the United Kingdom, the United States, Germany, the Netherlands, Israel, Russia, and Luxembourg.
The company announced on May 4, 2021 that it is partnering with Uber Technologies, Inc. (UBER) to develop an affordable, purpose-built EV for ride-hailing drivers. The Arrival Car is expected to enter production in the third quarter of 2023. So, the project is still in early stages and it’s uncertain if the launch will be successful.
ARVL was listed on NASDAQ on March 25, 2021, raising gross proceeds of $660 million. For the first quarter, ended March 31, 2021, the company’s Cash and cash equivalents came in at €516 million ($629.88 million). Its adjusted EBITDA loss is expected to be €27 million ($32.96 million) compared to €14 million ($17.10 million) in the prior-year period.
Analysts expect the company’s EPS to remain negative in its fiscal years 2021 and 2022. The stock lost 0.7% over the past month to close Friday’s trading session at $19.19.
ARVL’s poor prospects are apparent in its POWR Ratings. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
The stock has an overall F rating, which equates to Strong Sell in our proprietary rating system. It has a D grade for Sentiment, and an F grade for Value, Growth and Quality. Click here to see the additional POWR ratings for ARVL (Momentum and Stability).
ARVL is ranked #49 of 57 stocks in the Auto & Vehicle Manufacturers industry.
Blink Charging Co. (BLNK)
BLNK owns and operates EV charging equipment and networked EV charging services. It offers both residential and commercial EV charging equipment that enables EV drivers to recharge at various locations. It also offers a cloud-based software—the Blink Network.
Several law firms filed a securities fraud class action lawsuit against BLNK in February 2021. It is alleged that the company misrepresented and concealed the size and functionality of its EV charging station network. The lawsuit is expected to affect the company negatively.
BLNK’s gross profit declined 68.8% year-over-year to $0.96 million for the first quarter, ended March 31, 2021. The company’s net loss was $7.37 million compared to a $2.96 million loss in the prior-year period. It’s loss per share for the quarter came in at $0.18 compared to a $0.11 loss in the year-ago period.
The company’s revenue is expected to increase 53.5% year-over-year to $2.41 million for the current quarter, ending June 30, 2021. However, BLNK’s EPS is expected to remain negative in its fiscal years 2021 and 2022. The stock lost 20.5% year-to-date to close Friday’s trading session at $34.00.
BLNK’s POWR Ratings are consistent with this bleak outlook. The stock has an overall F rating, which equates to Strong Sell in our proprietary rating system. It has an F grade for Growth, Stability, Value, Quality and Sentiment also. Click here to see BLNK’s rating for Momentum grade.
Workhorse Group Inc. (WKHS)
WKHS designs, manufactures, builds, and sells battery-electric vehicles and aircraft in the United States. It offers electric and range-extended medium-duty delivery trucks under the Workhorse brand, and HorseFly Unmanned Aerial System, which is a custom-designed purpose-built all-electric drone system.
Several law firms filed a class action lawsuit against WKHS this month for violations of rule 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder by the U.S. Securities and Exchange Commission. It is alleged that the company made false and misleading statements to the market. It had no solid indication that the USPS would select an electric truck as its Next Generation Delivery Vehicle and was instead merely hoping that would be the case, according to the lawsuit’s allegation.
The company’s operating loss came in at $5.70 million for the first quarter, ended March 31, 2021 compared to a $1.67 million loss in the prior-year period. Its net loss came in at $120.51 million for the quarter compared to $4.80 million in the year-ago period.
WKHS’ annual revenue is expected to increase 218.1% year-over-year to $242.31 million in its fiscal year 2022. However, the company’s EPS is expected to remain negative in fiscal 2021 and 2022. The stock has lost 42.8% over the past nine months to close Friday’s trading session at $9.37.
WKHS has an overall F rating, which translates to Strong Sell in our proprietary rating system. It has an F grade for Quality, Sentiment, Value and Stability. It is also rated for Growth and Momentum. Click here to get all the WKHS ratings.
WKHS is ranked #56 in the Auto & Vehicle Manufacturers industry.
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ARVL shares were trading at $19.57 per share on Tuesday afternoon, up $0.38 (+1.98%). Year-to-date, ARVL has declined -30.41%, versus a 12.77% rise in the benchmark S&P 500 index during the same period.
About the Author: Ananyo Guha Niyogi
Ananyo’s ardent interest in capital markets, wealth management, and financial regulatory issues, led him to a career as an investment analyst. His goal is to educate individual investors by making complex financial issues easy to understand. More...
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