The transition of the automobile industry from internal-combustion-powered cars to electric vehicles (EV) will have major ripple effects for multiple industries. Several states in the United States have already declared a ban on the sale of new internal combustion cars beginning in 2035 to decrease carbon emissions. In addition, several other nations have announced similar plans to allow only EV sales in the next decade.
However, a global semiconductor shortage has emerged as a major impediment to the growth of the EV industry. According to the CEO of semiconductor company Marvell Technology, the semiconductor chip shortage may continue until 2022 and maybe beyond. This could dampen the revenue and earnings growth potential of several EV companies.
Given this backdrop, we think it would be wise to avoid fundamentally weak EV stocks Nikola Corporation (NKLA), Proterra Inc. (PTRA), Hyzon Motors Inc. (HYZN), and Workhorse Group Inc. (WKHS), which were the worst performers in the third quarter.
Nikola Corporation (NKLA)
NKLA is a US-based company that develops and integrates energy and transportation solutions. The company operates through two business segments: Trucking and Energy.
For the second quarter ended June 30, 2021, NKLA’s operating loss increased 59.8% year-over-year to $138.39 million. The company’s net loss grew 23.7% from the year-ago value to $143.23 million, while its loss per share came in at $0.36 over this period.
Analysts expect its EPS to decline 41.9% in fiscal 2021. The stock has declined 56.7% over the past year and 33.1% year-to-date. In the third quarter, the stock lost 39.8%.
NKLA’s POWR ratings are consistent with this bleak outlook. The stock has an overall rating of F, 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.
NKLA has an F grade for Value and Stability and a D for Growth and Quality. Within the D-rated Auto & Vehicle Manufacturers industry, it is ranked #60 of 62 stocks.
To see additional POWR Ratings for Sentiment and Momentum for NKLA, click here.
Proterra Inc. (PTRA)
PTRA develops and produces commercial electric vehicles. Proterra Powered; Proterra Energy; and Proterra Transit are the three operational segments of the company.
PTRA’s operating expenses increased 30.5% year-over-year to $31.06 million in the second quarter ended June 30, 2020. Its operating loss grew 38.7% from the year-ago value to $29.75 million over this period. The company’s net loss surged 732.8% from the prior-year quarter to $189.03 million, while its loss per share amounted to $4.24 over this period.
PTRA’s EPS is projected to remain negative in the current year. The stock has declined 46.3% over the past six months and 13.4% year-to-date. It lost 41.2% in the third quarter.
PTRA’s poor prospects are also apparent in its POWR Ratings. The stock has an overall F rating, which equates to Strong Sell in our proprietary rating system.
It also has an F grade for Quality and a D for Growth and Stability. PTRA is ranked #54 of 62 stocks in the same industry.
Click here to see the additional POWR Ratings for PTRA (Value, Momentum, and Sentiment).
Hyzon Motors Inc. (HYZN)
HYZN is a hydrogen mobility company that produces commercial hydrogen cars and fuel cell systems. It primarily focuses on medium and heavy-duty vehicles, as well as municipal and coach buses.
Last month, Blue Orca Capital issued a short-seller report alleging “HYZN’s supposed major customers are a fake-looking Chinese shell company.” The report also points other red flags, including the resignation of two chief technology officers of the company within its first 20 months.
During the second quarter ended June 30, 2021, HYZN’s operating expenses increased significantly year-over-year to $9.27 million. Its operating loss came in at $9.27 million. The company reported a net loss of $9.42 million, while its loss per share amounted to $0.10 over this period.
The company’s EPS is expected to remain negative in the current year. Also, the stock price dropped 43.5% over the past month and 32.9% in the third quarter.
HYZN’s weak fundamentals are reflected in its POWR ratings. The stock has an overall D rating, which equates to Sell in our POWR Ratings system. The stock also has a D grade for Value, Growth, and Sentiment. In the same industry, it is ranked #50 of 62 stocks.
In addition to the POWR Ratings grades I have just highlighted, you can see the HYZN rating for Momentum, Stability, and Quality here.
Workhorse Group Inc. (WKHS)
WKHS designs, produces, constructs, and distributes battery-electric vehicles and aircraft. The company also creates cloud-based, real-time telematics performance monitoring tools that help fleet operators save money and time by maximizing energy and route efficiency.
Last month, Block & Leviton started investigating WKHS for potential securities law violations. This could negatively impact the company’s share price in the near term.
WKHS’ operating expenses increased 64% year-over-year to $9.13 billion in the second quarter ended June 30, 2021. Its operating loss came in at $34.42 billion. The company reported a net loss of $43.62 billion over this period.
WKHS’ EPS is expected to decline 360% in fiscal 2021. The stock has declined 73.8% over the past year and 54.7% over the past six months. It lost 55.5% in the third quarter.
WKHS’ POWR ratings are consistent with this bleak outlook. The stock has an overall F rating, which equates to Strong Sell in our proprietary rating system.
It also has an F grade for Stability, Quality, and Sentiment. The stock is ranked #61 of 62 stocks in the same industry.
Beyond the POWR Ratings grades I have just highlighted, you can see the WKHS ratings for Value, Momentum, and Growth.
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NKLA shares were trading at $10.99 per share on Thursday morning, up $0.78 (+7.64%). Year-to-date, NKLA has declined -27.98%, versus a 19.08% rise in the benchmark S&P 500 index during the same period.
About the Author: Pragya Pandey
Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate. More...
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