The electric vehicle (EV) industry is expected to grow significantly in the long run based on supportive government policies and regulations amid rising automobile emission concerns. However, the EV market faces chip and labor shortages and supply chain issues, which make the industry’s near-term prospects bleak.
Furthermore, the industry has become overcrowded, with several new entrants vying for market share. But the fundamental weakness and overvaluation of many new participants make them risky bets for investors. In a reference to how the market values EVs versus traditional internal combustion engine (ICE) makers, Bernstein’s Tony Sacconaghi stated, “In 2014, they accounted for 15% of all BEVs [battery electric vehicles] sold. Today they account for 28%. However, even if they ultimately were to account for 50% of all EVs sold by 2030—which may be aggressive—it remains difficult to justify their current valuations.’’
Given this backdrop, we think it could be wise to stay away from EV stocks Hyzon Motors Inc. (HYZN), Lordstown Motors Corp. (RIDE), Vicinity Motor Corp. (VEV), and Ayro, Inc. (AYRO) now. Their sky-high valuations are not justified by their weak financials and growth prospects. Furthermore, these stocks were the worst-performing industry participants last month.
Hyzon Motors Inc. (HYZN)
HYZN is a hydrogen mobility company that manufactures hydrogen-powered commercial vehicles and fuel cell systems. The Honeoye Falls, N.Y.-based company focuses on developing medium- and heavy-duty trucks, as well as city and coach buses.
On November 1, 2021, the Schall Law Firm, a national shareholder rights litigation firm, reminded investors of a class-action lawsuit against HYZN for alleged violations of the Securities Exchange Act of 1934 and Rule 10b-5 under the U.S. Securities and Exchange Commission.
HYZN’s loss from operations for its second quarter, ended June 30, 2021, came in at $9.27 million compared to $168,000 in the previous period. Also, the company’s comprehensive loss was $9.48 million compared to $172,000 in the year-ago period. Its loss per share was $0.10, and it missed the consensus estimate by 25% in the second quarter of its fiscal year 2021.
In terms of forward EV/S, HYZN’s 38.72x is 1,885.5% higher than the 1.95x industry average. Moreover, its 38.14x forward P/S is also 2,333.5% higher than the 1.57x industry average.
Analysts expect HYZN’s EPS to remain negative in its fiscal years 2021 and 2022. The stock declined 25% in price in October. Over the past three months, the shares have declined 6.4% to close yesterday’s trading session at $6.30.
Lordstown Motors Corp. (RIDE)
Automotive company RIDE develops, manufactures, and sells Endurance, an electric full-size pickup truck for fleet customers. The Lordstown, Ohio, company also owns the 6.2 million square foot Lordstown Assembly Plant.
RIDE’s total operating expenses for its second quarter, ended June 30, 2021, came in at $110.34 million, up 1,009.9% year-over-year. Furthermore, its net loss came in at $108.2 million, compared to $7.96 million in the previous period. Its loss per share was $0.61, compared to $0.11 in the year-ago period.
In terms of forward EV/S, RIDE’s 164.27x is 11,388.2% higher than the industry average of 1.43x. Moreover, its forward P/S of 273.74x is higher than the industry average of 1.21x by 22,463.6%.
Analysts expect RIDE’s EPS to remain negative in its fiscal years 2021 and 2022. Its EPS is expected to decline at a 123.1% rate in the current year and 27.1% per annum over the next five years. It declined 35% in October. The stock has declined 78% in price over the past nine months to close yesterday’s trading session at $5.60.
Vicinity Motor Corp. (VEV)
Based in Canada, VEV designs, engineers, manufactures, and sells Vicinity branded mid-size multi-purpose transit vehicles for public and commercial enterprises in the USA and Canada. It offers buses in clean diesel, gas, CNG drive systems; & also produces, sells spare parts.
On October 13, 2021, VEV announced the formation of a strategic supply agreement with Electrovaya Inc. However, this collaboration might suffer due to the company’s weak financials.
VEV’s inventory came in at CAD 13.56 million ($10.94 million) for the period ended June 30, 2021, compared to CAD32.61 million ($26.32 million) for the period ended December 31, 2020. Its trade and other receivables were CAD2.56 million ($2.06 million), compared to CAD 4.15 million ($3.35 million). Also, its sales and administrative expenses were CAD1.93 million ($1.55 million), up 81.3% year-over-year.
VEV share price declined by 15% in October. Also, it has declined 46.8% over the past nine months to close yesterday’s trading session at $4.20.
Ayro, Inc. (AYRO)
AYRO designs and manufactures light-duty, emissions-free electric vehicles for urban and community transport, local delivery, closed campus mobility, recreational, and government use. The company is headquartered in Round Rock, Tex.
On August 11, 2021, AYRO’s CEO Rod Keller said: “Despite the growing demand and increased purchase orders, revenue was down slightly from first quarter, mostly due to the Current being launched near the end of the quarter and given that we started manufacturing of the Current at Karma Automotive’s Innovation and Customization Center in California for the first time.”
AYRO’s net intangible assets came in at $137,334 for the period ended June 30, 2021, compared to $143,845 for the period ended December 31, 2020. Its total current liabilities were $4.27 million, compared to $1.59 million for the same period. Moreover, its total liabilities came in at $5.2 million, compared to $2.6 million, also for the same period.
In terms of forward EV/S, AYRO’s 4.53x is 217.1% higher than the 1.43x industry average Furthermore, its 23.59x forward P/S is also higher than the 1.21x industry averages by 1,844.3%.
AYRO’s EPS is expected to remain negative in fiscal years 2021 and 2022. Its EPS is estimated to decline at a 13.9% rate in fiscal 2021. Also, the stock has retreated 53.8% in price over the past nine months to close yesterday’s trading session at $3.18. It declined 13.5% in October.
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HYZN shares were trading at $5.74 per share on Tuesday morning, down $0.56 (-8.89%). Year-to-date, HYZN has declined -45.85%, versus a 24.61% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries. More...
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