In response to a global clean energy drive that is now kicking into second gear, the electric vehicle (EV) sector finds itself now jammed tight with several new players. And the shares of many relatively new players have gained as much as those of the established players, based solely on investor optimism, despite possessing insufficient fundamental strength. Furthermore,  competition is rising, with major traditional automobile manufacturers entering the EV space. As a result, fundamentally weak and overvalued EV stocks are expected to retreat in the coming months.

Another major reason for investors to be concerned is a current global semiconductor shortage that has led many auto-makers halt production. Also, rapidly rising Treasury yields, which is usually a turn off to the equity markets, should act as a major industry headwind given companies’ expensive valuations. The 10-year U.S. Treasury yield is now hovering above 1.73%.

Hence, we think fundamentally weak and struggling EV companies Kandi Technologies Group, Inc. (KNDI), Beam Global (BEEM), and Ayro, Inc. (AYRO) are best avoided now.

Click here to checkout our Electric Vehicle Industry Report for 2021

Kandi Technologies Group, Inc. (KNDI)

KNDI is a China-based company that develops, produces and distributes EV products, EV parts and off-road vehicle products. The company operates four business lines–the development and sale of pure electric automobiles, electric vehicle parts, intelligent battery swapping systems, and all-terrain vehicles.

A class action lawsuit was filed against KNDI by various law firms over the past couple of months. The plaintiffs allege that KNDI  artificially inflated its reported revenues through undisclosed related party transactions and had relationships with key customers that indicated the lack of arm’s-length transactions with KNDI. This controversy has brought  instability and disruption to functioning of the business, which was already affected by the negative effects of the COVID-19  pandemic.

Last year, a short-seller firm Hindenburg Research released a scathing report that accused the company of faking sales to raise $160 million from U.S. investors. In that report, the firm claimed  that almost 64% of KNDI’s sales over the last year have been to undisclosed related parties. A day later, KNDI issued an initial response to the allegations, saying it believes the report “contains numerous errors, misstatements of historical facts, inaccurate conclusions, and superfluous opinions.”

KNDI’s net revenues have decreased 43.3% year-over-year to $76.90 million in its fiscal year 2020 ended December 31. Its operating income has declined 17.1% to $0.75 million. The company reported a net loss of $10.4 million, up 44.6% from the previous year.

Analysts expect KNDI to report a loss per share of $0.15 in its fiscal year 2021 ending December 31. The stock has lost 8.7% over the past six months.

KNDI’s POWR Ratings are consistent with this bleak outlook. The stock has an overall rating of F, which equates to 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.

KNDI has a D grade for Value, and Sentiment, and an F for Stability, and Quality. It is currently ranked #83 in the 83-stock D-rated China industry.

In total, we rate KNDI on eight different levels. Beyond what we’ve stated above, we also have given KNDI grades for Momentum, and Growth. Get all KNDI’s ratings here.

Beam Global (BEEM)

BEEM designs and manufactures solar products and technology solutions focused on creating renewably energized products for electric vehicle and drone charging, outdoor media and branding, and energy security. The company’s product line includes the Electric Vehicle Autonomous Renewable Charger (EV ARC) and the Solar Tree.

Last month, the City of Olathe, Kansas deployed BEEM’s six EV ARC solar-powered EV charging systems with the help of a Metropolitan Energy Center (MEC) federal grant. The USDA Forest Service Job Corps program has also purchased an EV AR 2020 to power four government fleet vehicles.

However, despite these developments, the company’s results for its fiscal year 2020 ended December 31 are far from impressive. BEEM’s loss from operations has risen 59.2% from the previous year to $5.21 million, while its net loss has increased 32.5% to $5.21 million over the same period, attributable primarily to a reduction in gross margin and increased operating expenses.

Analysts expect BEEM to report a loss per share of $0.16 in the current quarter, ended March 31, 2021. Moreover, the company has missed the Street’s EPS estimates in three of the trailing four quarters. The stock has lost 45.7% year-to-date.

BEEM has an overall F rating, which translates to Strong Sell in our proprietary rating system. BEEM has an F grade  for Quality, Value, and Sentiment. It is currently ranked #16 of 20 stocks in the F-rated Solar industry.

Click here to see the additional POWR Ratings for BEEM (Momentum, Growth, and Stability).

Ayro, Inc. (AYRO)

Texas-based AYRO is a designer and manufacturer of purpose-built, automotive-grade EVs. The company specializes in light-duty trucks designed for commercial use and urban commutes covering short distances. Founded in 2015, AYRO went public through a reverse merger with DropCar on May 29, 2020. Before making its market debut, the merged company AYRO undertook a reverse 1-for-5 stock split.

Last month, AYRO entered an agreement with Element Fleet Management to support the deployment of large fleets of its electric delivery vehicles over the next four years. Element Fleet will help bring AYRO’s next-generation delivery EVs to market by offering comprehensive management services and financing.

AYRO’s revenues have increased 80.2% year-over-year to $1.60 million in its  fiscal year 2020 ended December 31. However, its top-line growth has not been translated into overall profitability. Its loss from operations has risen 19% from the previous year to $10.11 million. The company reported a net loss of $10.76 million, up 24.2% over the same period.

A  consensus loss per share estimate of $0.81 for its fiscal year 2021, ending December 31, represents  a 12.5% improvement  year-over-year. The stock has gained 8.2% year-to-date but is currently  trading 46.1% below its 52-week high of $11.50, indicating solid short-term bearishness.

AYRO’s poor prospects are apparent in its POWR Ratings also. . The stock has an overall F rating, which equates to Strong Sell in our proprietary rating system. AYRO has an F grade for Stability, Sentiment, and Quality. In the 51-stock Auto & Vehicle Manufacturers industry, it is ranked 47.

We also have given AYRO grades for Value, Growth, and Momentum. Get all AYRO’s ratings here.

Click here to checkout our Electric Vehicle Industry Report for 2021

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KNDI shares were trading at $6.32 per share on Tuesday afternoon, up $0.09 (+1.44%). Year-to-date, KNDI has declined -8.41%, versus a 9.17% 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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