The electric vehicle (EV) industry is expected to grow manifold in the long run, thanks to the growing climate change concerns, favorable government policies, and technological advancements in batteries. However, the recently-identified omicron coronavirus variant could aggravate the semiconductor chip shortage, hampering the EV industry’s progress.

According to Makoto Uchida, the CEO of Nissan Motor Co., Ltd. (NSANY), “We have a semiconductor shortage as an industry and how we recover from that is critical.” Moreover, sky-rocketing production expenditures with regards to EVs pose a threat for several companies. Stellantis N.V. (STLA) CEO Carlos Tavares said on December 1 that the costs are “beyond the limits” of what the auto industry can sustain.  

Given this backdrop, it could be wise to avoid EV stocks Arrival (ARVL) and Faraday Future Intelligent Electric Inc. (FFIE). They have lost more than 25% over the past month, and their growth prospects look bleak.

Arrival (ARVL)

Based in Howald, Luxembourg, ARVL focuses on designing, assembling, and distributing commercial EVs internationally. The company’s portfolio of EVs includes commercial EV vans, buses, and cars.

On November 9, 2021, Kaskela Law LLC announced that it had started to investigate claims on behalf of investors of ARVL. The investigation concerns whether ARVL and certain of its officers and/or directors have engaged in securities fraud or other unlawful business practices and whether ARVL investors have been harmed, consequently.

ARVL’s operating loss for the third quarter ended September 30, 2021, came in at €45.96 million ($52.02 million) compared to €20.61 million ($23.36 million) in the prior-year period. Its loss for the period increased 18.2% year-over-year to €26.39 million ($29.92 million). Also, its total current liabilities came in at €51.52 million ($58.41 million) for the period ended September 30, 2021, compared to €38.92 million ($44.13 million) for the period ended December 31, 2020.

ARVL’s EPS is expected to remain negative in fiscal 2021 and 2022. Over the past month, the stock has declined 49.9% to close yesterday’s trading session at $8.83.

ARVL’s POWR Ratings reflect its poor prospects. The stock has an overall D rating, which equates to a Sell in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

It has a D grade for Value and Quality. We’ve also rated it for Growth, Stability, Momentum, and Sentiment. Click here to access all the ARVL ratings. It is ranked #41 of 63 stocks in the F-rated Auto & Vehicle Manufacturers industry.

Faraday Future Intelligent Electric Inc. (FFIE)

FFIE engages in the design, development, manufacture, engineering, sale, and distribution of EVs and related products in the United States and internationally. Known for its EV, FF 91, the company is focused on developing and creating a mobility ecosystem that integrates clean energy, artificial intelligence (AI), and the Internet.

FFIE made its stock market debut on July 22, 2021, merging with a special purpose acquisition company, Property Solutions Acquisitions Corp. On November 15, it announced that it could not file its Form 10-Q for the fiscal quarter ended September 30, 2021, within the prescribed period. In addition, it is uncertain when it will be able to file its results. Moreover, on December 1, it was announced that Block & Leviton is investigating FFIE for potential securities law violations. This represents a potential drawback for the company.

Analysts expect FFIE’s EPS to remain negative in fiscal 2021 and 2022. The stock has lost 25.5% over the past month to close yesterday’s trading session at $6.58.

FFIE’s POWR Ratings are consistent with this bleak outlook. The stock has an overall F rating, which translates to a Strong Sell. It has an F grade for Value and Quality and a D grade for Growth, Stability, and Sentiment. Click here to see FFIE’s rating for Momentum as well. Again, it is ranked #56 in the same industry.

ARVL shares were trading at $8.37 per share on Thursday afternoon, down $0.46 (-5.21%). Year-to-date, ARVL has declined -70.23%, versus a 23.70% rise in the benchmark S&P 500 index during the same period.

About the Author: Riddhima Chakraborty

Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries. More...

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