While the COVID-19 pandemic disrupted factory operations and sales for many industries, the electric vehicle (EV) industry saw explosive sales growth across Europe, China and the United States. With governments worldwide pushing for fleet electrification as climate change becomes a more pressing concern, the EV industry is poised to thrive this year as well.
However, competition continues to grow in the EV space, with a staggering number of new players entering the market, seeking to capitalize on bullish sentiment toward the industry. But some new entrants do not possess sufficient fundamental strength to succeed amid the intensifying competition. With concerns over the prospects for Canoo Inc. (GOEV), Romeo Power, Inc. (RMO), and Arcimoto, Inc. (FUV), Wall Street analysts have downgraded these EV stocks lately. These players are also having a difficult time increasing their sales.
We believe that these stocks are highly speculative investments because their current losses are too high for the companies to generate profits anytime soon. Given their poor near-term growth prospects, we think it is best that investors stay away from these stocks now.
Canoo Inc. (GOEV)
Incorporated in 2017, GOEV is a mobility technology company that designs and manufactures electric vehicles for sale in commercial and consumer markets in the United States. It manufactures multi-purpose delivery vehicles, lifestyle vehicles, and B2B delivery vehicles and offers its services to independent contractors, service technicians, retailers, and small businesses.
This month, The Law Offices of Frank R. Cruz, Berman Tabacco, and Glancy Prongay & Murray LLP have filed a class action lawsuit on behalf of GOEV’s shareholders. Also, on April 3, the Schall Law Firm announced that it has launched an investigation against the company, on behalf of its investors for securities law violation.
Last month, GOEV appointed Claudia Romo Edelman and Arthur Kingsbury to the company’s Board of Directors. Their deep experience in business and innovation should help drive growth of GOEV.
GOEV’s net loss and comprehensive loss was $12.3 million in the fourth quarter, ended December 31. It reported a loss from operation of $127.66 million, compared to $37.32 million in the fourth quarter of 2019. The company’s adjusted ebitda loss was $42.5 million, compared to $35.26 million in the prior year period. GOEV’s net loss per share came in at $0.08 over this period.
In fact, the stock is down 37% over the past month and is currently trading 63.9% below its 52-week high of $24.90. This indicates short-term bearishness. The Street expects GOEV’s EPS to decline 12.3% in the current year and 1.1% in 2022.
Analysts at Roth Capital downgraded the stock to Neutral from Buy. They also reduced their price target on the stock from $30 to $12.
GOEV’s POWR Ratings are consistent with this bleak outlook. The stock has an overall F rating, which translates to a 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.
It has a C grade for Momentum, D for Stability, and an F for Growth. Of the 51-stocks in the B-rated Auto & Vehicle Manufacturers industry, it is ranked #44.
In addition to the POWR Ratings grades I’ve just highlighted, you can see the GOEV ratings for Value, Quality, and Sentiment here.
Romeo Power, Inc. (RMO)
California-based energy storage technology company RMO manufactures lithium-ion battery modules and packs for commercial electric vehicles in the United States. The company provides battery management systems and other engineering related services through two segments—Romeo Power North America and Joint Venture Support.
In February, the company signed a memorandum of understanding (MOU) with Ecellix Inc., a developer of eCell, to work together to develop and launch next-generation battery technology. This should allow RMO to produce battery material technology that meets or exceeds their customers’ needs.
In January, RMO entered a strategic alliance agreement with Republic Services, Inc. to develop ROM’s battery technology for use in Republic’s electric garbage trucks. The collaboration could strengthen RMO’s position in the electric vehicle market as the two companies work towards sustainable commercial transportation.
In the fourth quarter ended December 31, 2020, RMO’ product revenue declined 53.5% year-over-year to $813 thousand. It generated a gross loss of $5.47 million and an operating loss of $15.28 million. Also, the company reported a net loss of $19.08 million, compared to a net loss of $13.2 million in the fourth quarter of 2019.
The stock has lost 34.3% over the past month and 63.2% year-to-date. Also, RMO is currently trading at $8.28, which is 78.7% below its 52-week high of $38.90. Williams Financial analysts rated RMO a Hold. Also, their price target of $6.70 represents a potential downside of 19.1%.
RMO’s weak prospects are apparent in its POWR Ratings too. The stock has an overall F rating, equating to a Strong Sell in our proprietary rating system. RMO also has an F grade for Stability and Sentiment, and a D for Quality. In the A-rated Auto Parts industry, the stock is ranked #66 of 67 stocks.
To see additional POWR Ratings for Growth, Value, and Momentum for RMO, click here.
Arcimoto, Inc. (FUV)
Formerly known as WTP Incorporated, FUV is a manufacturer and seller of three-wheeled electric vehicles. The company’s diverse portfolio includes Fun Utility Vehicle, Rapid Responder, for specialized emergency, security, and law enforcement services, and Deliverator for the delivery of goods.
Last month, Glancy Prongay & Murray LLP, Rosen Law Firm, and Law Offices of Howard G. Smith launched investigations concerning FUV’s possible violations of the federal securities laws, on behalf of the company’s shareholders.
Also, last month, FUV appointed Dilip K. Sundaram, the former President – Corporate Affairs of Mahindra Group – Americas, as the company’s Chief International Business Officer. His international automotive leadership experience of more than 20 years should allow him to take charge of FUV’s international expansion efforts.
During its fiscal year ending December 31, 2020, FUV incurred a net loss of $18.1 million, compared to a net loss of $15.3 million in 2019. Moreover, its loss per share was $0.63 over this period. The company’s expenses increased significantly because it increased its manufacturing capacity by 110% year-over-year.
FUV’s stock is down 32.1% over the past month. Moreover, it is currently trading 64.4% below its 52-week high of $36.80. In fact, the company missed the Street’s EPS estimates in three of the trailing four quarters. Amit Dayal, an H.C. Wainwright analyst downgraded FUV from Buy to Neutral without a price target.
FUV’s poor prospects are apparent in its POWR Ratings also well. The stock has an overall F rating, equating to a Strong Sell in our proprietary rating system. It also has an F grade for Quality, Stability, and Value. In the B-rated Auto & Vehicle Manufacturers industry, FUV is ranked #51 of 51 stocks.
Click here to see the additional POWR Ratings for FUV (Momentum, Growth, and Sentiment).
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GOEV shares were trading at $8.72 per share on Monday morning, down $0.27 (-3.00%). Year-to-date, GOEV has declined -36.81%, versus a 8.56% rise in the benchmark S&P 500 index during the same period.
About the Author: Imon Ghosh
Imon is an investment analyst and journalist with an enthusiasm for financial research and writing. She began her career at Kantar IMRB, a leading market research and consumer consulting organization. More...
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