Electric vehicles (EVs) have gained much popularity over the past few years as concerns about climate change grow. However, Chief Executive of the multinational automotive manufacturing company, Stellantis N.V, Carlos Tavares, said that the external pressure to accelerate the shift toward EVs potentially threatens vehicle quality, as automakers try to cope with the cost burden.

Moreover, President Biden’s Build Back Better plan, which allocated $320 billion in clean energy, including the EV tax credits and funding for charging stations, has been stalled after West Virginia Democrat Joe Manchin opposed the spending plan. Additionally, the global chip shortage is not expected to end anytime soon, creating operational disruptions for EV makers.

Popular EV stocks on subreddit r/wallstreetbets Rivian Automotive, Inc. (RIVN - Get Rating), Lucid Group, Inc. (LCID - Get Rating), NIO Inc. (NIO - Get Rating), and Nikola Corporation (NKLA - Get Rating) have gained significantly despite lacking fundamental strength. Thus, these meme stocks are best avoided now.

Rivian Automotive, Inc. (RIVN - Get Rating)

RIVN is an electric adventure vehicles developer and manufacturer. The company offers electric sports utility vehicles and pickup vehicles for its customers. The company went public on the Nasdaq Global Select Market on November 10, 2021, through a traditional IPO process.

On December 2, Amazon.com, Inc. (AMZN) company, Amazon Web Services, Inc. (AWS), announced that RIVN chose it as its cloud provider. RIVN aims to accelerate commercial and consumer shift to electric vehicles through this development. However, it might take a while for the company to leverage AMZN’s services and enhance its software-defined vehicle architecture.

RIVN’s loss from operations increased 169.4% year-over-year to $776 million in the fiscal third quarter ended September 30. Net loss per share attributable to common stockholders came in at $12.21, up 324% from the prior-year quarter. The adjusted net loss went up 168.5% from the same period last year to $776 million.

Analysts expect RIVN’s EPS to remain negative at least until next year (fiscal 2022).

RIVN’s shares declined 4.5% over the past month to close yesterday’s trading session at $107.09.

This bleak outlook is reflected in RIVN’s POWR Ratings. The stock has an overall grade of D, equating 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.

RIVN has a Value, Stability, and Sentiment grade of D. In the 66-stock Auto & Vehicle Manufacturers industry, it is ranked #41. The industry is rated F. To see the additional POWR Ratings for Growth, Momentum, and Quality for RIVN, click here.

Lucid Group, Inc. (LCID - Get Rating)

LCID is an EV designing, and building company focused on building EV powertrains and battery systems. The company went public via a merger with Churchill Capital Corp IV on July 26, 2021.

On December 23, shareholder rights litigation firm, The Schall Law Firm announced that it is investigating potential claims against LCID for supposed violation of federal securities laws and supposed issuance of false or misleading statements or failure to disclose information pertinent to investors. Earlier, the company had declared that it had received a subpoena from the United States Securities and Exchange Commission (SEC) requesting documentation related to its merger with Atieva, Inc and Churchill Capital Corp. IV.  Several other law firms are also investigating the company.

For the fiscal third quarter ended September 30, LCID’s revenue decreased 30.5% year-over-year to $0.23 million. Loss from operations increased 206.6% from the same period last year to $497.05 million, while net loss attributable to common stockholders stood at $524.40 million, up 225.2% from the prior-year quarter.

The consensus EPS estimate for the current quarter (ending December 2021) stands at a negative $0.35.

Over the past month, LCID’s stock has declined 25.3% to close yesterday’s trading session at $38.64.

It’s no surprise that LCID has an overall F rating, which translates to a Strong Sell in our POWR Rating system. LCID has an F grade for Value, Stability, Sentiment, and Quality. It is ranked #61 in the Auto & Vehicle Manufacturers industry. Click here to see the additional POWR Ratings for Growth and Momentum for LCID.

NIO Inc. (NIO - Get Rating)

NIO is a manufacturer and seller of smart electric vehicles in China. The Shanghai, China-based company offers electric SUVs, smart electric sedans and provides energy and service packages to customers.

On November 19, NIO announced closing its American Depositary Shares (ADSs) offering, raising gross proceeds of $2 billion before deducting commissions. The company plans to use the proceeds for general corporate purposes. However, it may reduce shareholder return.

NIO’s total operating expenses increased 94.9% year-over-year to $463.28 million in the fiscal third quarter ended September 30. Net loss and net loss per share, attributable to ordinary shareholders of NIO, came in at $443.69 million and $0.28, up 140.7% and 85.7% from the same period last year, respectively.

Street EPS estimate for the current quarter (ending December 2021) of a negative $0.20 indicates a 25% year-over-year decrease. Moreover, NIO has missed consensus EPS estimates in three out of the trailing four quarters.

The stock has declined 34.5% over the past year and 38.5% year-to-date to close yesterday’s trading session at $29.96.

NIO’s poor prospects are reflected in its POWR Ratings. The stock has an overall D rating, equating to Sell in our proprietary rating system. NIO has an F grade for Stability and a D grade for Value and Quality. It is ranked #53 in the same industry. Click here to see the additional POWR Ratings for NIO (Growth, Momentum, and Sentiment).

Nikola Corporation (NKLA - Get Rating)

NKLA is a technology innovator and integrator that develops energy and transportation solutions in the United States. The company, operating through the two business units of Truck and Energy, engages in the assembly, integration, and commission of its vehicles in collaboration with its business partners and suppliers.

On December 21, NKLA announced a resolution with SEC in which the company has agreed to pay $125 million to the SEC in five installments to settle and conclude certain government investigations of NKLA. The first installment is expected to be paid at the end of this year, and the remaining installments will be paid semi-annually through 2023. This might result in a significant cash outflow.

For the fiscal third quarter ended September 30, NKLA’s loss from operations increased 131.8% year-over-year to $271.83 million. Non-GAAP net loss and non-GAAP net loss per share went up 47.4% and 37.5% from the prior-year quarter to $88.54 million and $0.22, respectively.

Analysts expect NKLA’s EPS to decrease 121.4% year-over-year to a negative $0.31 in the next quarter (ending March 2022).

NKLA’s stock has declined 21.6% over the past year and 29.4% year-to-date to close yesterday’s trading session at $10.78.

NKLA has an overall rating of F, which translates to a Strong Sell in our POWR Rating system. The stock has a Value and Stability grade of F and a Growth and Quality grade of D. It is ranked #59 in the same industry.

In addition to the POWR Rating grades we’ve stated above, one can see NKLA ratings for Momentum and Sentiment here.

RIVN shares were trading at $102.81 per share on Tuesday afternoon, down $4.28 (-4.00%). Year-to-date, RIVN has gained 2.06%, versus a 29.16% rise in the benchmark S&P 500 index during the same period.

About the Author: Anushka Dutta

Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research. More...

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