The ongoing EV boom has allowed investors to enjoy substantial returns on investment, as evident from Global X Autonomous & Electric Vehicles ETF’s (DRIV) 78.1% returns over the past year. This can be attributed to changing consumer attitudes towards electric cars, further bolstered by federal government subsidies and tax credits.
With governments across the globe planning to phase out fuel-powered vehicles starting 2035, the EV space has become overcrowded with several new entrants, seeking to capitalize on the impending revolution. These companies are currently riding on the bullish market sentiment, without adequate fundamental strength to justify their stock price gains. In the absence of adequate technological strength and product portfolios, the stocks of these companies are susceptible to significant pullbacks.
Given the scenario, it would be wise to avoid highly overvalued EV players like Arcimoto Inc. (FUV), Electrameccanica Vehicles Corp. (SOLO), and XL Fleet Corp. (XL) that have a limited market reach and technical expertise compared to the well-established players.
Arcimoto Inc. (FUV)
FUV develops and manufactures efficient and affordable electric vehicles for everyday commuters and fleets to help the world shift to a sustainable transportation system. The company’s products include Fun Utility Vehicle, Rapid Responder, and Deliverator.
Earlier in January, FUV reached an agreement to acquire Tilting Motor Works for approximately $10 million. On January 6, 2021, FUV announced that it has agreed to purchase a 185,000 square foot manufacturing site in Eugene, Oregon. These developments are expected to create significant pressure on FUV’s cash balance, given the fact that the company is still not profitable.
The company has been facing major difficulty in improving upon its end-to-end manufacturing and assembly processes in the third quarter ended September 30, 2020. FUV’s gross loss has increased 4032.9% year-over-year to $1.36 million in the third quarter. Its operating loss has increased 22.7% from the year-ago value to $4.61 million, while net loss has increased 15.4% to $4.64 million over the same period.
Analysts expect FUV to report a negative EPS of $0.12 in the about-to-be reported quarter ended December 31, 2020. The company missed the Street EPS estimates in three of the trailing four quarters. The stock has gained 1518.6% over the past year. In terms of forward-12-month Price/Sales, the stock is currently trading at 293.89x, significantly higher than the industry average of 1.36x.
FUV’s POWR Ratings are consistent with this bleak outlook. The stock has an overall rating of F which equates to a Strong Sell in our proprietary rating system. The POWR Ratings are calculated by taking into account 118 different factors with the weighting of each optimized to improve overall performance.
FUV also has a grade of F for Stability, Value, and Quality. It is currently ranked #50 in the 52-stock Auto & Vehicle Manufacturers Industry.
In total, we rate FUV on eight different levels. Beyond what we stated above, we also have given FUV grades for Momentum, Sentiment, and Growth. Get all of FUV’s ratings here.
Electrameccanica Vehicles Corp. (SOLO)
Based in Canada, SOLO is a development-stage company engaged in the automobile and multi-utility vehicles business sector. The company’s flagship vehicle, SOLO, is the innovative, purpose-built, single-seat EV. It operates in two reportable business segments: Electric Vehicles and Custom build vehicles.
On January 15, 2021, SOLO announced the expansion of its retail network to three new West Coast locations bringing the total retail locations to 13 across three western states. Slated to open in March, the new direct-to-consumer retail locations will offer shoppers the ability to learn more, explore the vehicle, and place reservations onsite.
SOLO’s loss from operations has increased 12.8% year-over-year to C$8.80 million in the third quarter ended September 30, 2020. The increase in operating loss was primarily due to the increased G&A expenses as well as increased stock-based compensation expenses. Its net loss has increased 181.1% from the year-ago value to C$14.9 million over the same period. This increase was primarily related to the fair market revaluation of the Company’s warrant derivative liability.
Analysts expect SOLO’s EPS to decrease 100% year-over-year to a negative $0.08 in the current quarter ending March 31, 2021. The company missed the Street EPS estimates in three of the trailing four quarters. The consensus revenue estimate of $140,000 for the about-to-be reported quarter ended December 31, 2020, indicates a 37.6% decrease year-over-year.
The stock has gained 274.5% over the past year. However, the company does not have adequate financials to justify its price increase because it is still in the development stage. In terms of forward-12-month Price/Sales, the stock is currently trading at 1234.4x, significantly higher than the industry average of 1.36x.
SOLO’s poor prospects are apparent in its POWR Ratings as well. The stock has an overall rating of F equating to a Strong Sell in our proprietary rating system. SOLO also has a grade of F for Quality, Stability, and Value. In the same industry, the stock is ranked #47.
Click here to see the additional POWR Ratings for SOLO (Momentum, Growth, and Sentiment).
XL Fleet Corp. (XL)
XL is a designer and developer of hybrid electric solutions for the commercial and municipal vehicle market in North America. The company manufactures hybrid electric drive systems and data-analytic systems that measure key automotive performance indicators for both new and in-use vehicles.
Earlier this month, XL entered into a strategic partnership with Curbtender to jointly develop a series of all-electric and plug-in hybrid electric commercial trucks for use in waste management applications.
On December 22, 2020, XL announced that it has completed its previously announced merger with Pivotal Investment Corporation II (PIC) for a cash transaction of approximately $350 million.
However, despite these positive developments, the company’s results for the third quarter ended September 30, 2020, are far from impressive. XL’s loss from operations has increased 1319.1% year-over-year to $1.87 million in the third quarter ended September 30, 2020. Its loss per share has increased 2500% from the year-ago value to $0.26 over the same period.
The stock has gained 102.3% over the past year, but it is presently trading 41.7% below its 52-week high of $35, indicating a short-term bearishness.
XL’s poor prospects are also apparent in its POWR Ratings. The stock has an overall rating of F which translates to a Strong Sell in our proprietary rating system. FSR has a grade of F for both Growth and Value, and a D for Stability, and Sentiment. It is currently ranked #66 of 68 stocks in the Auto Parts Industry.
Click here to see the additional POWR Ratings for XL (Momentum and Quality).
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FUV shares were unchanged in after-hours trading Tuesday. Year-to-date, FUV has gained 102.19%, versus a 4.93% rise in the benchmark S&P 500 index during the same period.
About the Author: Rishab Dugar
Rishab is a financial journalist and investment analyst. His investment approach is to focus on quality stocks, trading at low prices, with business models that he readily understands. More...
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