The US added 517,000 jobs in January, far above the forecast of 185,000 by Bloomberg. Also, the unemployment rate was 3.4% in January, below the 3.6% economists’ forecast. The labor market strength suggests continued rate hikes ahead. Rising interest rates and a slowing economy have kept auto sales under pressure.
While favorable public and private investment and robust demand amid global sustainability initiatives have fueled the growth of the electric vehicle (EV) market, high EV prices have deprived optimal sales. Moreover, rising tensions between the US and China may lead to increased tariffs or other trade barriers, making it further expensive for vehicle manufacturers to source components from China.
Furthermore, EV adoption is restricted by inadequate charging infrastructure. According to a new report out of S&P Global Mobility, the US needs to quadruple its charging infrastructure by 2025 and grow it more than eight times by 2030.
Given this backdrop, fundamentally weak stocks NIO Inc. (NIO - Get Rating), Nikola Corporation (NKLA - Get Rating), and Lordstown Motors Corp. (RIDE - Get Rating) might be best avoided now.
NIO Inc. (NIO - Get Rating)
Headquartered in Shanghai, China, NIO designs, manufactures and sells smart electric vehicles. It offers both smart electric sedans and electric SUVs with multiple seating options. The company also designs, develops, and produces e-powertrains, battery packs, and components.
NIO’s trailing-12-month ROCE, ROTC, and ROTA of negative 40.68%, 13.28%, and 11.24% are significantly lower than their respective industry averages of 12.76%, 6.38%, and 4.42%.
In terms of forward EV/Sales, NIO is at 2.18x, which is 75.1% higher than the 1.25x industry average. Its forward Price/Sales of 2.44x is 144.9% higher than the 1.00x industry average.
During the fiscal third quarter that ended September 30, 2022, NIO’s gross profit declined 12.9% from the year-ago value to RMB1.74 billion ($256.78 million). Its total operating expenses increased 87.8% year-over-year to RMB5.61 billion ($827.91 million). Its adjusted net loss increased by 514.2% from the prior year’s quarter to RMB3.50 billion ($516.52 million).
Analysts expect NIO’s EPS to decline 27.3% year-over-year to negative $0.27 for the fiscal fourth quarter that ended December 2022. Also, the company failed to surpass the consensus EPS estimates in each trailing four quarters.
Shares of NIO have slumped 51.6% over the past year to close the last trading session at $11.19. It has a 24-month beta of 1.12.
NIO’s POWR Ratings reflect its bleak outlook. The stock has an overall rating of F, equating to a Strong Sell in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
The stock has a D grade for Growth, Stability, Quality, and Sentiment. Within the D-rated Auto & Vehicle Manufacturers industry, it ranks #52 of 62 stocks.
In addition to the POWR Ratings highlighted above, one can access NIO’s ratings for Value and Momentum here.
Nikola Corporation (NKLA - Get Rating)
NKLA focuses on developing energy and transportation solutions. It operates in two segments, Truck and Energy. The Truck segment creates and commercializes battery hydrogen-electric and battery-electric semi-trucks, while the Energy segment builds a hydrogen fueling station network.
The stock’s trailing-12-month gross profit margin of negative 133.29% compares to the industry average of 29.03%. Also, its trailing-12-month ROTC and ROTA of negative 55.93% and 62.24% are significantly lower than their respective 6.76% and 5.28% industry averages.
Its forward EV/Sales multiple of 18.48 is 913.3% higher than the 1.82x industry average. In terms of forward Price/Sales, NKLA’s 18.70 is higher than the 1.45 industry average.
NKLA’s adjusted EBITDA loss widened 24.6% year-over-year to $105.93 million in the fiscal 2022 third quarter that ended September 30. The company’s non-GAAP net loss rose 38.3% year-over-year to $122.45 million, and its non-GAAP loss per share increased 27.3% year-over-year to $0.28.
Street expects NKLA’s EPS to decline 46.8% year-over-year to negative $0.57 for the fiscal fourth quarter that ended December 2022. Moreover, the company has failed to surpass the consensus EPS estimates in three of the trailing four quarters.
The stock has plummeted 63.2% over the past six months, closing the last trading session at $2.75. Its 24-month beta is 1.90.
NKLA’s POWR Ratings reflect its poor prospects. The stock has an overall F rating, equating to a Strong Sell in our proprietary rating system.
The stock has an F grade for Stability and Quality and a D for Growth, Value, and Sentiment. It is ranked last in the same industry.
Click here to access NKLA’s ratings for Momentum.
Lordstown Motors Corp. (RIDE - Get Rating)
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.
Its trailing-12-month ROCE, ROTC, and ROTA of negative 55.36%, 38.21%, and 52.20% are significantly lower than their respective industry averages of 12.76%, 6.38%, and 4.42%.
In terms of forward EV/Sales, RIDE is trading at 76.40x, which is significantly higher than the 1.25x industry average. Its forward Price/Sales multiple of 189.01 is remarkably higher than the industry average of 1.00.
RIDE’s total operating expenses rose 56% year-over-year to $154.85 million in the third quarter that ended September 30, 2022. Its net loss came in at $154.43 million, up 61.2% year-over-year. Its adjusted operating loss amounted to $33.76 million.
RIDE’s EPS is expected to decrease 7.7% year-over-year to negative $1.23 in the current fiscal year ending December 2023.
Over the past six months, the stock has lost 49.8% to close the last trading session at $1.47. It has a 24-month beta of 1.48.
RIDE has an overall F rating that translates 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 #46 in the same industry.
To access RIDE’s grades for Momentum and Growth, click here.
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NIO shares were trading at $10.84 per share on Monday morning, down $0.35 (-3.13%). Year-to-date, NIO has gained 11.18%, versus a 7.26% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities. More...
More Resources for the Stocks in this Article
| Ticker | POWR Rating | Industry Rank | Rank in Industry |
| NIO | Get Rating | Get Rating | Get Rating |
| NKLA | Get Rating | Get Rating | Get Rating |
| RIDE | Get Rating | Get Rating | Get Rating |
