Rising concerns globally regarding climate change has steered governments’ attention to electric vehicles (EVs), many of which now provide policy support to EV companies. President Biden had allocated $174 billion from his planned infrastructure spending package for the U.S. EV industry to install 500,000 charging stations and to replace internal combustion cars by 2030. The global EV market is expected to grow at a CAGR of 29% over the next five years.
However, many companies in this space have garnered significant investor attention with promises that have not always been backed by reality. And with investors now rotating away from overvalued stocks in the sector to undervalued companies that are poised to grow with an economic recovery, the weak EV players are retreating. A global semiconductor chip shortage is another factor that could reduce the near-term growth potential of most EV companies.
Therefore, we think it’s wise to avoid fundamentally weak stocks QuantumScape Corporation (QS), Arrival Limited (ARVL), Lordstown Motors Corp. (RIDE) and Beam Global (BEEM). They have declined more than 45% year-to-date.
QuantumScape Corporation (QS)
QS serves the automotive industry by developing and commercializing solid-state lithium-metal batteries for electric vehicles and other applications. The company uses its original equipment manufacturer (OEM)-validated battery technology to design the batteries. The stock has lost 57.9% year-to-date and closed Friday’s trading session at $35.52.
On April 18, QS considered a legal action against Scorpion Capital because Scorpion had accused QS of fraud in its short seller report. The report has precipitated a 13% decline in QS’ shares since its release. On April 15, QS announced plans to build a highly automated factory for battery manufacturing in North San Jose. And last month, Volkswagen Group of America Investments, LCC (VW)successfully tested QS’ solid-state lithium-metal cells in its labs in Germany and will invest $100 million in QS.
QS’ non-GAAP operating loss was $22.42 million for the fourth quarter, ended December 31, 2020, which represents a 71.1% rise year-over-year. The company’s operating expenses increased nearly 100% year-over-year to $30.19 million. Its net loss was $694.74 million, representing an increase of 4762.4% year-over-year. QS’ net loss per share increased 3916.7% year-over-year to $2.41. Analysts expect the company’s EPS to remain negative for fiscal 2022, which represents a decline by 25% year-over-year.
QS’ POWR Ratings are consistent with this bleak outlook. The stock has an overall D rating, which equates to Sell in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.
The stock has a D grade for Stability, Sentiment, and Value. We have also graded QS for Growth, Quality, and Momentum. Click here to access all of QS’ ratings.
QS is ranked #59 of 66 stocks in the A-rated Auto Parts industry.
Arrival Limited (ARVL)
ARVL designs, researches and develops, assembles, and produces robotics and EVs. The company offers trucks, vans, buses and other commercial vehicles and operates in the U.K., U.S., Germany and Russia. The stock closed Friday’s trading session at $14.40.
CIIG Merger Corp. (CIICU), a U.S. publicly traded special purpose acquisition company, completed a business combination with ARVL on March 24.In an announcement, ARVL said it will be building its second U.S. Microfactory in Charlotte, North Carolina, to produce two different classes of EV vans. And in February, ARVL announced that it will use the bus routes of First Bus, one of the U.K.’s largest transport operators, to begin trials of its zero-emission Bus. A negative consensus EPS estimate for its fiscal year 2021 represents a decline of 23.1% year-over-year.
ARVL’s dismal prospects are also apparent in its POWR Ratings. The stock has an overall rating of D, which equates to Sell in our proprietary rating system. The stock has an F grade for Growth, and a D grade for Value, Sentiment, and Quality. In addition to the POWR Ratings grades we’ve just highlighted, one can see ARVL’s ratings for Momentum and Stability here.
ARVL is ranked #44 of 53 stocks in the B-rated Auto & Vehicle Manufacturers industry.
Lordstown Motors Corp. (RIDE)
Based in Lordstown, Ohio, RIDE is an automotive company that designs and manufactures light duty electric trucks targeted for sale to fleet customers. The company’s integrated software monitors and adjusts each wheel, and its telematics system provides owners a range of data for fleet management. The company’s Lordstown Endurance vehicle is a popular electric pick-up truck. The stock has lost 50.1% year-to-date and closed Friday’s trading session at $10.02.
On April 17, various law firms filed a shareholder class action lawsuit against RIDE, on behalf of investors. Hindenburg Research published a report in March that alleged that RIDE’s claimed 100,000 pre-orders for its EV truck were “largely fictitious and used as a prop to raise capital and confer legitimacy.” For the fourth quarter, ended December 31, 2021, RIDE’s loss from operations was $38.55 million, which represented a rise of 441.3% year-over-year. The company’s total liabilities have increased 40.4% year-over-year to $35.09 as of December 31, 2020. Its net loss was $38.24 million for the fourth quarter, up 436.8% year-over-year. RIDE’s net loss per share was $0.23, which represents a rise of 130% from the prior-year period. Analysts expect the company’s EPS to remain negative for its fiscal year 2021, which represents a decline of 62.5% year-over-year.
It’s no surprise that RIDE has an overall F rating, which equates to Strong Sell in our POWR Ratings system. The stock also has an F grade for Growth and Sentiment, and a D grade for Stability, Value, and Quality. In addition to the POWR Ratings grades we’ve just highlighted, one can see RIDE’s ratings for Momentum here.
RIDE is ranked #51 in the Auto & Vehicle Manufacturers Industry.
Beam Global (BEEM)
Headquartered in San Diego, California, BEEM designs, manufactures, and sells renewable energy products for EV charging infrastructure, drone charging, outdoor media and branding, and energy security products. The company’s product portfolio includes Electric Vehicle Autonomous Renewable Charger (EV ARC), Solar Tree DC fast charging and EV ARC DC fast charging. The stock has lost 54.8% year-to-date and closed Friday’s trading session at $33.34.
On April 13, a leading Georgia utility deployed two EV ARC sustainable EV charging systems for public use in high traffic areas. In March, the City of Olathe, Kansas deployed six EV ARC solar-powered EV charging systems to provide free EV charging to travelers and city fleet vehicles. Also in March, Auburn University in Alabama deployed Alabama’s first EV ARC solar-powered EV charging system for free on-campus EV charging. The company has also expanded its federal government customer base and received its first order for EV ARC from a USDA Forest Service. BEEM had $710,974 loss for the fourth quarter, ended December 31, 2020, up 362.3% year-over-year. The company’s total operating expense has increased 44.2% year-over-year to $4.50 million. Its loss from operations increased 59.2% year-over-year to $5.21 million, and its net loss came in at $5.21 million for the quarter, which represented an increase of 32.5% year-over-year. The company had $3.75 million total liabilities as of December 31, 2020, up 156.4% year-over-year. BEEM’s loss per share was $0.84.
Analysts expect the company’s EPS to remain negative for fiscal 2021. The stock has missed consensus EPS estimates in three out of the trailing four quarters.
BEEM’s 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. The stock also has an F grade for Stability, Value, Sentiment, and Quality. We have also graded BEEM for Growth and Momentum. Click here to access all BEEM’s ratings.
BEEM is ranked #17 of 20 stocks in the F-rated Solar industry.
The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.
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QS shares were trading at $31.62 per share on Monday afternoon, down $3.90 (-10.98%). Year-to-date, QS has declined -62.56%, versus a 11.47% rise in the benchmark S&P 500 index during the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market. More...
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