Electric vehicles (EVs) are projected to dominate the automobile market eventually because governments worldwide are undertaking various initiatives to reduce carbon emissions. However, the global semiconductor chip shortage is likely to stall the industry’s growth because major industry players have plans to cut production significantly.
The chip shortage is projected to reduce global auto output by 7.1 million vehicles in 2021. The rising cost of semiconductor chips is another reason EV manufacturers are scaling down their output. As a result, many EV companies’ revenue and earnings growth forecasts will likely remain weak in the coming quarters.
Given the bleak outlook for the EV industry, we believe that financially unstable EV stocks Faraday Future Intelligent Electric Inc. (FFIE), Canoo Inc. (GOEV), and GreenPower Motor Company Inc. (GP) are best avoided now. These stocks have declined more than 15% in price over the past week.
Faraday Future Intelligent Electric Inc. (FFIE)
FFIE develops and produces artificial intelligence-powered electric automobiles. In addition, it offers ownership models, in-vehicle entertainment, and autonomous driving technology. The company serves the technology, automotive, energy, and aerospace industries.
FFIE’s operating loss came in at $442.74 million in the second quarter, ended June 30, 2021. The company reported a $5.73 billion net loss , while its loss per share totaled $0.77 over this period.
A $2.50 consensus EPS estimate for the next year represents a 133.6% decline year-over-year. FFIE’s stock has declined 16% in price since August 16.
FFIE’s POWR ratings are consistent with this bleak outlook. The stock has an overall F rating, which translates to Strong Sell in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
FFIE is rated an F grade for Growth and Value, and a D for Quality. Within the D-rated Auto – Vehicle Manufacturers industry, it is ranked #51 of 62 stocks.
To see additional POWR Ratings for Stability, Sentiment, and Momentum for FFIE, click here.
Canoo Inc. (GOEV)
GOEV designs, engineers, and manufactures electric cars in the United States for the commercial and consumer markets. In addition, using skateboard architectural technology, the company provides B2B delivery cars, multi-purpose delivery vehicles, and lifestyle vehicles.
This month, Scott+Scott Attorneys at Law LLP, a global securities and consumer rights law firm, started investigating whether some directors and executives of Hennessy Capital Acquisition Corp. IV, now known as Canoo Inc., violated their fiduciary obligations to Hennessy Capital IV and its shareholders. This could negatively impact the stock’s price performance in the near term.
During the second quarter, ended June 30, 2021, GOEV’s operating loss increased 426.8% year-over-year to $104.35 billion. Its net loss surged 384.3% year-over-year to $112.55 million. Its loss per share increased 75.6% year-over-year to $0.50. And the company’s cash and cash equivalents declined 19.8% from their year-ago value to $563.57 million.
Analysts expect GOEV’s EPS to decline 1,520% year-over-year to $0.81 next year. GOEV has declined 16.2% in price since August 16 and 57.2% over the past three months.
GOEV’s poor prospects are also apparent in its POWR Ratings. The stock has an overall F rating, which equates to Strong Sell in our proprietary rating system.
It also has an F grade for Sentiment and Growth, and a D for Stability. GOEV is ranked #56 of 62 stocks in the Auto – Vehicle Manufacturers industry.
Click here to see the additional POWR Ratings for GOEV. (Quality, Momentum, and Value).
GreenPower Motor Company Inc. (GP)
GP develops, produces, and sells electric cars for commercial customers in the United States and Canada. The company provides a range of high-floor and low-floor electric medium- and heavy-duty vehicles, including transit buses, school buses, shuttles, cargo vans, double-decker buses, and a cab and chassis.
For the first quarter, ended June 30, 2021, GP’s operating loss increased 137.2% year-over-year to $2.08 billion. Its net loss grew 58.2% year-over-year to $2.26 billion. And its loss per share increased 22.2% year-over-year to $0.11. The company’s net cash used in operating activities surged 46.6% from its year-ago value to $1.21 billion.
GP’s stock has declined 25.5% in price since August 16 and 56.5% over the past six months.
GP’s weak fundamentals are reflected in its POWR ratings. The stock has an overall F rating, which equates to Strong Sell in our POWR Ratings system. The stock also has an F grade for Stability, Quality, and Value. In the Auto – Vehicle Manufacturers industry, it is ranked #59 of 62 stocks.
In addition to the POWR Ratings grades I have just highlighted, you can see the GP rating for Momentum, Sentiment, Growth and Quality here.
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FFIE shares were trading at $8.98 per share on Monday morning, down $0.24 (-2.60%). Year-to-date, FFIE has declined -10.20%, versus a 20.45% rise in the benchmark S&P 500 index during the same period.
About the Author: Pragya Pandey
Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate. More...
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