Share prices in the electric vehicle (EV) industry have been experiencing a sharp pullback since early 2021. Investors are rotating away from overvalued EV stocks to cyclical stocks to capitalize on the prospective economic recovery. This is evident in the S&P Kensho Electric Vehicles Index’s 3.5% returns year-to-date versus the benchmark S&P 500’s 10.8% gains over this period.
Also, because investors fear the formation of an EV bubble and believe that it could pop soon, they are adopting a fundamental approach to investing, looking for solid financials and growth potential rather than investing in stocks based solely on optimism about an industry’s growth prospects. Furthermore, a global semiconductor shortage has aggravated the sector’s situation, and most EV companies are downgrading their outlook for 2021 given skyrocketing production costs. Also, as oil prices stabilize, with OPEC gradually curbing its production cuts, consumers are expected to continue purchasing internal combustion vehicles, at least until Biden’s proposed $174 billion EV package becomes a reality.
Thus, the EV industry slowdown is expected to continue this quarter. Amid these developments, we think investors must avoid Fisker, Inc. (FSR), Electrameccanica Vehicles Corp. (SOLO), and Green Power Motor Company (GP), given their weak fundamentals and negative earnings growth potential.
Fisker, Inc. (FSR)
Founded by renowned luxury car designer Henrik Fisker, FSR made its stock market debut through a reverse merger in October 2020. The company went public through a SPAC with Apollo Global Management affiliated Spartan Acquisition Energy Corporation on October 30, making it one of the newest players in the electric vehicle market. The company has generated $1 billion in cash through the merger, including $500 million through common stock PIPE funding.
In the fourth quarter of 2020, FSR announced the completion of business operations with Spartan Energy Acquisition Corp. The move facilitated additional PIPE funding of $977 million for the company’s product development and operating expenses.
FSR’s non-GAAP operating loss was $31.31 million for the fourth quarter ended December 31, 2020, up 1,033% year-over-year. Its net loss increased 299% year-over-year to $12.04 million, translating to a loss of five cents per share.
FSR is currently on track to start production of the Fisker Ocean EV in the fourth quarter of 2022, as stated in its last earnings release. However, the company had more than 12,467 reservations for the vehicle as of February 26. Thus, it will take considerable time for FSR to generate adequate revenue channels to break-even.
The Street expects FSR’s EPS to remain negative until at least 2022. The company’s loss per share is expected to rise 117.5% from the same period last year to $0.87 in fiscal 2022. Shares of FSR have declined 15.6% year-to-date, and 40.2% over the past month.
It’s no surprise that FSR has an overall rating of D, which equates to Sell in our POWR Ratings system. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.
The stock has a D grade for Value, Stability, and Sentiment. FSR is ranked #42 of 53 stocks in the Auto & Vehicle Manufacturers industry. Beyond what we’ve stated above, one can check out additional FSR Ratings for Momentum, Quality, and Growth here.
Electrameccanica Vehicles Corp. (SOLO)
Based in Canada, SOLO develops single-seater vehicles for multipurpose usage. It began commercial production of its flagship three-wheeled SOLO EV for single riders in August 2020. It develops traditional EVs and custom-built vehicles for personal use as well for multi-utility delivery purposes.
SOLO is currently expanding its production facilities across the country, and it is planning to open direct-to-customer retail centers in 20 locations across. SOLO plans also to open its U.S.-based assembly facility and engineering center in Mesa, Phoenix. While this facility is expected to assemble up to 20,000 vehicles each year, the engineering center has not yet been fully constructed. Given the high competition in the U.S. EV market, this delay could be detrimental to the company’s revenue-generating capacity.
SOLO’s revenues declined 5.9% year-over-year in the fourth quarter ended December 31, 2020. Its operating loss was $11.10 million, up 76.2% from the same period last year. This can be attributed to a 123.5% rise in general and administrative expenses, and 90% rise in operating expenses. Its net loss rose 573.8% from the prior year quarter to $41.10 million.
SOLO’s EPS is expected to remain negative until at least 2022. Analysts expect the company’s loss per share to double from the same period last year to $0.08 in the first quarter, ended March 2021. It has a poor earnings surprise history as well; it missed the Street’s EPS estimates in three out of trailing four quarters. The stock has declined 34.4% year-to-date.
SOLO’s poor fundamentals are reflected in the POWR Ratings. The stock has an overall F rating, which equates to a Strong Sell in our proprietary rating system. SOLO has an F grade for Quality, Stability, Sentiment, and Value. It is ranked #52 in the Auto & Vehicle Manufacturers industry.
We have also graded SOLO on parameters such as Growth and Momentum as well. Get all SOLO’s Ratings here.
Green Power Motor Company (GP)
GP is a Canada-based commercial EV manufacturer that develops school buses, vans, charter buses, and double-deckers for sale in the U.S. and Canada. The company made its stock market debut through an upsized IPO on August 28, 2020. Prior to this, shares of GP traded in TSX Venture Exchange and in the over-the-counter markets.
The company delivered only 17 vehicles in the fiscal third quarter ended December 31, 2020. GP’s revenues declined 51.8% year-over-year to $2.40 million over this period. Its loss from operations more than doubled from its year-ago value to $2.13 million, while its net loss increased 108.4% from the same period last year to $2.43 million. The company incurred a loss of 11 cents per share during this period.
On March 18, GP received a purchase order for four wirelessly charged, FTA Buy America compliant EV star vehicles from Washington Grant Transit. However, GP is not expected to deliver this order until fall 2021, highlighting the delay in the company’s production and delivery process. GP also entered a purchase agreement in February to deliver 150 EV units. But the company aims to deliver the bulk order over a span of 36 months.
Analysts expect GP to report a loss of six cents per share in the fiscal fourth quarter ended March 2021, and a loss of 24 cents per share this year. The stock has declined 38.3% year-to-date to close yesterday’s trading session at $17.95.
GP’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.
The stock has a F grade for Stability, Value, and Quality. Moreover, it is ranked #48 in the same industry. Click here to view additional GP Ratings for Growth, Sentiment, and Momentum.
The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.
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FSR shares were trading at $12.88 per share on Tuesday afternoon, up $0.51 (+4.12%). Year-to-date, FSR has declined -12.08%, versus a 10.36% rise in the benchmark S&P 500 index during the same period.
About the Author: Aditi Ganguly
Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities. More...
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