The auto industry has been suffering amid widespread macroeconomic headwinds. Rising interest rates and high inflation have compounded the industry’s problems with borrowing costs expanding.

According to a survey released by industry consultants J.D. Power-LMC Automotive, the total number of new car retail sales in the United States is forecast to fall in December as high vehicle prices and rising borrowing rates force consumers to rein in their spending.

This month, new car retail sales are anticipated to reach around 1.04 million units, a 2.8% decrease from the previous year.

In addition, Jeff Schuster, president of global forecasts at LMC Automotive, said, “We expect 2023 to carry a high level of risk and uncertainty as several markets could be dealing with a recession.”

Therefore, fundamentally weak stocks Canoo Inc. (GOEV), Lordstown Motors Corp. (RIDE), Faraday Future Intelligent Electric Inc. (FFIE), and NIO Inc. (NIO) might be best avoided.

Canoo Inc. (GOEV)

GOEV, a mobility technology firm, designs, engineers, develops, and manufactures electric vehicles in the United States for commercial and consumer markets. The company provides lifestyle delivery cars, multi-purpose delivery vehicles, and pickups.

In terms of its forward EV/Sales, GOEV is trading at 265.15x, higher than the 1.06x industry average. Its forward Price/Sales multiple of 243.81 is higher than the industry average of 0.82.

GOEV’s trailing-12-month ROCE of negative 158.29% is lower than the industry average of 12.92%, while its trailing-12-month ROTA of negative 122.66% is lower than the industry average of 4.54%.

GOEV’s loss from operations came in at $109.34 million for the third quarter ended September 30, 2022, up 2.2% year-over-year. Its net loss came in at $117.71 million, up 45.5% year-over-year, while its loss per share came in at $0.43, up 18.6% year-over-year. 

GOEV’s EPS is expected to decrease 16.4% year-over-year to negative $1.77 for the quarter ending September 2022. Also, it missed EPS estimates in three out of four trailing quarters. Over the past year, the stock has lost 86.6% to close the last trading session at $1.07.

GOEV’s poor fundamentals are reflected in its POWR Ratings. The stock’s overall F rating is a Strong Sell in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

GOEV has an F in Value, Quality, and Stability and a D in Sentiment. Within the D-rated Auto & Vehicle Manufacturers industry, it is ranked #66 out of 90 stocks. Click here to see the additional POWR Ratings for Momentum and Growth for GOEV.

Lordstown Motors Corp. (RIDE)

RIDE develops, manufactures, and sells Endurance, an electric full-size pickup truck for fleet customers. It is a North American light-duty original equipment manufacturer (OEM) focused solely on EVs for commercial fleet customers.

In terms of its forward EV/Sales, RIDE is trading at 22.39x, higher than the 1.06x industry average. Its forward Price/Sales multiple of 135.01 is higher than the industry average of 0.82.

RIDE’s trailing-12-month ROCE of negative 55.36% is lower than the industry average of 12.92%, while its trailing-12-month ROTA of negative 52.20% is lower than the industry average of 4.54%.

RIDE’s loss from operations came in at $154.85 million for the third quarter ended September 30, 2022, up 56% year-over-year. Its net loss came in at $154.43 million, up 61.2% year-over-year. Its current assets came in at $252.18 million for the period ended September 30, 2022, compared to $291.14 million for the period ended December 31, 2021.

RIDE’s EPS is expected to decrease 17.6% year-over-year to negative $1.4 in 2023. Over the past year, the stock has lost 72.4% to close the last trading session at $1.05.

RIDE’s overall F rating equates to a Strong Sell in our POWR Ratings system. It has an F grade for Quality and a D for Value, Stability, and Sentiment. It is ranked #56 in the same industry.

We have also rated RIDE for Momentum and Growth. Get all RIDE ratings here.

Faraday Future Intelligent Electric Inc. (FFIE)

FFIE engages in the design, development, manufacture, engineering, sale, and distribution of electric vehicles and related products in the United States and internationally.

FFIE’s trailing-12-month ROCE of negative 103.44% is lower than the industry average of 12.92%, while its trailing-12-month ROTA of negative 89.23% is lower than the industry average of 4.54%.

FFIE’s cash and cash equivalents came in at $31.76 million for the period ended September 30, 2022, compared to $505.09 million for the period ended December 31, 2021. Its total assets came in at $540.68 million, compared to $907.43 million for the same period.

FFIE’s EPS is expected to remain negative in the coming quarters. Moreover, it missed EPS estimates in three out of four trailing quarters. Over the past year, the stock has lost 93.6% to close the last trading session at $0.32.

FFIE’s POWR Ratings reflect its weak prospects. Its overall F rating equates to a Strong Sell in our POWR Ratings system.

It has an F grade for Stability and Quality and a D for Value and Sentiment. The stock is ranked #54 in the same industry. To see additional FFIE ratings for Momentum and Growth, click here.

NIO Inc. (NIO)

Headquartered in Shanghai, China, NIO markets smart electric vehicles. The company provides five, six, and seven-seater electric SUVs and smart electric sedans. In addition, it manufactures e-powertrains, battery packs, and components and offers sales and after-sales management activities.

In terms of its forward EV/Sales, NIO is trading at 1.92x, higher than the 1.06x industry average. Its forward Price/Sales multiple of 2.19 is higher than the industry average of 0.82.

NIO’s trailing-12-month EBIT margin of negative 26.33% is lower than the industry average of 7.96%, while its trailing-12-month asset turnover ratio of 0.52% is lower than the industry average of 1.01%.

NIO’s total revenue came in at $1.83 billion for the third quarter that ended September 30, 2022, down 32.6% year-over-year. Its gross profit decreased 12.9% year-over-year to $243.92 million. The company’s total operating expenses increased 87.8% year-over-year to $787.99 million.

The company’s EPS is expected to remain negative in 2023. Over the past year, the stock has lost 66.9% to close the last trading session at $9.80.

It’s no surprise that NIO has an overall F rating, which equates to a Strong Sell in our POWR Ratings system. It has an F grade for Stability and a D for Growth, Value, Sentiment, and Quality. NIO is ranked #64 in the same industry.

We have also rated NIO for Momentum. Get all NIO ratings here.

GOEV shares were trading at $1.15 per share on Thursday morning, up $0.08 (+7.48%). Year-to-date, GOEV has declined -85.10%, versus a -17.95% rise in the benchmark S&P 500 index during the same period.

About the Author: Rashmi Kumari

Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions. More...

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