The last year has seen significant investor interest in the electric vehicle (EV) industry, as governments worldwide announced initiatives to address climate change concerns. The future of the global EV market looks promising, with big opportunities for growth in the battery, hybrid, and plug-in-hybrid EV markets. According to Globe Newswire, the global EV market is expected to grow at a CAGR of 29% from 2021 – 2026.
However, investors’ ongoing rotation away from the EV stocks to cyclical industries to capitalize on the impending economic recovery is driving a sell-off of overvalued EV stocks. In addition to valuation concerns, rising global competition in the EV space and a semiconductor chip shortage are raising investor concerns regarding the industry’s near-term prospects.
Fisker Inc. (FSR) and Nikola Corporation (NKLA) have already lost significant value since hitting their all-time highs and will likely suffer further declines because they still look overvalued at their current price levels considering their bleak near-term growth prospects. So, we think it could be wise to avoid these stocks now.
Fisker Inc. (FSR)
Headquartered in Manhattan Beach, Calif., FSR designs, develops, manufactures, and sells electric vehicles (EVs). It also provides mobility solutions. Also, the company’s electric sport utility vehicle (SUV) — Fisker Ocean — is available to consumers through a leasing package.
FSR’s operating loss for the fourth quarter, ended December 31, 2020 was $31.31 million. Its net loss was $12.04 million compared to $3.02 million in the fourth quarter of 2019. Also, its loss per share for the quarter came in at $0.05 compared to $0.03 in the prior-year period.
Analysts expect FSR’s EPS to decline 112.5% in its fiscal year 2021. In terms of forward price-to-book ratio, the stock is currently trading at 4.93x, which is 29.4% higher than the 3.81x industry average.
FSR has declined 50.4% since hitting its all-time high of $31.96 on March 2, 2021. It is currently trading 56.2% below its high.
FSR’s POWR Ratings are consistent with this bleak outlook. The stock has an overall D rating, which equates to Sell in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.
The stock has a D Grade for Sentiment, Stability, and Value. Click here to access FSR’s ratings for Quality, Growth, and Momentum as well.
FSR is ranked #42 of 53 stocks in the Auto and Vehicles Manufacturers industry.
Nikola Corporation (NKLA)
Founded in 2015, NKLA provides zero-emissions transportation and infrastructure solutions and designs and manufactures battery-electric and hydrogen-electric vehicles. The company operates primarily through two segments—Truck and Energy. Its products include Nikola One, Nikola Two, Nikola Tre and Nikola Badger.
NKLA’s loss from operations was $146.84 million for the fourth quarter ended December 31, 2020. Its net loss for the quarter was $147.10 million compared to $26.28 million in the prior year period. And its loss per share came in at $0.38 compared to $0.16 in fiscal 2019 fourth quarter.
NKLA’s EPS is expected to decline 68.8% for the quarter ending June 30, 2021 and 80.6% in its fiscal year 2021. In terms of forward EV/S ratio, the stock is currently trading at 197.13x, which is much higher than the 2.02x industry average. Its 240.88x forward price/sales ratio is also significantly higher than the industry average 1.58x.
NKLA has been involved in several controversies of late, and on March 27,Kahn Swick & Foti, LLC (KSF) began an investigation into the company in response to allegations that it failed to disclose material information and violated federal securities laws. In fact, NKLA’s founder and executive chairman, Trevor Milton, resigned in September 2020 after the company disclosed that its internal investigation had alleged that he had made several ‘inaccurate’ claims about the company’s business and products. Furthermore, NKLA discontinued its collaboration on refuse truck development with Republic Services, Inc. (RSG) in December 2020. The stock has declined 85.5% since hitting its all-time high of $93.99 in June 2020. It closed Friday’s trading session at $11.05, trading 88% below its high.
NKLA’s poor prospects are apparent in its POWR Ratings also. The stock has an overall F rating, which equates to Strong Sell in our proprietary rating system. It has an F grade for Stability, Value, and Quality and a D grade for Sentiment. Click here to see the additional ratings for NKLA (Momentum and Growth).
NKLA is ranked #47 in the same industry.
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FSR shares were trading at $14.06 per share on Monday afternoon, up $0.05 (+0.36%). Year-to-date, FSR has declined -4.03%, versus a 12.07% 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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