Electric vehicles (EVs) are expected to revolutionize the automotive industry. According to a Research Dive report, the EV market is expected to grow at a 19.8% CAGR between 2021 -2028. However, a global semiconductor chip shortage makes the industry’s near-term growth prospects bleak.
Even though the U.S. government has been taking several steps to address the chip shortage, there is speculation that the current shortage could last for another two years. So, the EV industry could continue to face production issues. Investors’ pessimism regarding the EV space is evident in the Global X Autonomous & Electric Vehicles ETFs’ (DRIV) 1.9% returns over the past three months versus the SPDR S&P 500 Trust ETF’s (SPY) 6.6% gains.
Given this backdrop, we think it wise to avoid Nikola Corporation (NKLA) and Canoo Inc. (GOEV). In addition to the industry headwinds, these companies’ weak financials may cause their shares to continue declining.
Nikola Corporation (NKLA)
NKLA designs and manufactures battery electric and hydrogen-electric vehicles. It operates in two business units: truck and energy. Its truck business unit develops and commercializes battery electric vehicles, hydrogen fuel cell electric vehicles and vehicle components. Its energy business unit is focused on developing and constructing a network of hydrogen fueling stations for its fuel-cell electric customers.
Former Louisiana Attorney General Charles C. Foti, Jr., Esq., a partner at the law firm of Kahn Swick & Foti, LLC. announced on March 12, 2021, that the firm has commenced an investigation into whether the officers and directors of NKLA breached their fiduciary duties to the company’s shareholders or violated state or federal laws.
NKLA’s loss from operations increased 276.9% year-over-year to $120.59 million for its fiscal first quarter, ended March 31, 2021. Its net loss increased 262.7% year-over-year to $120.22 million, while its adjusted loss before interest, taxes, depreciation and amortization increased 83.2% year-over-year to $53.43 million. The company’s non-GAAP loss per share increased 16.7% year-over-year to $0.14.
Analysts expect NKLA’s EPS to remain negative in 2021 and 2022. The stock has lost 52.6% over the past nine months to close yesterday’s trading session at $15.76.
NKLA’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 The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has an F grade for Value, Stability and Quality, and a D grade for Sentiment and Growth. Click here to see the additional POWR rating for NKLA (Momentum). It is ranked #56 of 57 stocks in the C-rated Auto & Vehicle Manufacturers industry.
Canoo Inc. (GOEV)
GOEV is a mobility technology company that designs, engineers, develops, and manufactures electric vehicles for commercial and consumer markets in the United States. The company offers B2B delivery vehicles, multi-purpose delivery vehicles, and lifestyle vehicles using skateboard architecture technology. It intends to serve small businesses, independent contractors, service technicians and others.
Several law firms filed a class action lawsuit against GOEV and certain of its officers on behalf of shareholders who purchased or otherwise acquired its securities between August 18, 2020, and March 29, 2021. It is alleged that the company issued a series of false and misleading statements to investors and failed to disclose several facts in relation to its merger with Hennessy Capital.
GOEV’s loss from operations increased 287.4% year-over-year to $97.07 million for its fiscal first quarter, ended March 31, 2021. Its net loss came in at $15.23 million compared to $30.89 million in the prior-year period. Its assets decreased 5% sequentially to $717.83 million. The company’s loss per share was $0.07 compared to $0.37 in the year-ago period.
The company’s EPS is expected to remain negative in 2021 and 2022. The stock has declined 33.9% over the past three months to close yesterday’s trading session at $10.20.
GOEV’s POWR Ratings are consistent with this bleak outlook. The company has an overall F rating, which translates to Strong Sell in our proprietary ratings system. The stock has an F grade for Growth, and a D grade for Value, Quality and Stability.
Click here to see GOEV’s ratings for Momentum and Sentiment as well. It is ranked #48 in the same industry.
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NKLA shares were trading at $16.87 per share on Thursday afternoon, up $1.11 (+7.04%). Year-to-date, NKLA has gained 10.55%, versus a 13.29% rise in the benchmark S&P 500 index during the same period.
About the Author: Nimesh Jaiswal
Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles. More...
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