The current electric vehicle (EV) boom has been a catalyst to the EV component market; the demand for lithium batteries, adequate charging infrastructure and ancillary components has been rising rapidly.
However, most component companies are soaring solely based on bullish market sentiment regarding the core electric vehicle industry even though EV sales volume is still relatively low. The overall slump in the global automotive market and depressed consumer spending have led to EV component sales to remain relatively low.
Intense competition from the industry leaders has also raised concerns regarding the sustainability of the small-cap EV component companies. Hence, we believe overvalued EV component companies Velodyne Lidar, Inc. (VLDR) and XL Fleet Corp. (XL) are best avoided in the near-to-mid-term.
Velodyne Lidar, Inc. (VLDR)
VLDR is known worldwide for its broad portfolio of lidar technologies that meet the needs of a wide range of industries, including autonomous vehicles, robotics, unmanned aerial vehicles (UAV), smart cities and security. The Company offers directional sensors, close-range sensors and software solutions.
VLDR announced a multi-year sales agreement with Emesent last week to provide it with Puck LITE sensors for mobile mapping systems. Recently, VLDR also collaborated with Beijing Trunk Technology Co. Ltd. to develop next-generation autonomous heavy trucks and to accelerate the commercialization of driverless trucks in China’s logistics market.
However, despite these positive developments, the company’s results for the third quarter ended September 30, 2020 are far from impressive. VLDR incurred a non-GAAP net loss of $9.10 million, with a $0.06 loss per share. Its operating loss for the three-month period amounted to $2.74 million.
Also, reduced production capabilities at its manufacturing sites over the fourth quarter, due to a COVID-19 breakout in its San Jose factory, impaired the company’s ability to fulfill certain of its customers’ orders in December.
While VLDR’s proprietary technology seems promising, no evidence of the efficacy of its autonomous driving technology is currently available. This, combined with its declining share price over the past couple of months, makes VLDR an extremely risky investment right. Thus, it is advisable to wait for the launch of at least a prototype of its state-of-the-art technology and its integration with EVs before investing in the stock.
A consensus revenue estimate of $116.02 million for the fiscal 2021 ending December 31, 2020represents a 24% rise from the year-ago value. However, it will take some time for the company to become profitable. Analysts expect VLDR’s to report a negative EPS of $0.51 in the about-to-be reported quarter (ended December 31, 2020).
The stock has gained 37.8% over the past three months. However, VLDR does not have adequate financials to justify this price increase. In terms of forward price/sales, the stock is currently trading at 38.54x, significantly higher than the industry average 4.32x.
VLDR’s POWR Ratings are consistent with this bleak outlook. The stock has an overall rating of D, 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. VLDR has a grade of F for Stability and Value, and D for Growth. It is currently ranked #86 in the 89-stock Industrial – Machinery Industry.
In total, we rate VLDR on eight different levels. Beyond what we stated above, we also have given VLDR grades for Momentum, Sentiment, and Quality. Get all VLDR’s ratings here.
XL Fleet Corp. (XL)
XL is a designer and developer of hybrid electric solutions for the commercial and municipal vehicle market in North America. The company manufactures hybrid electric drive systems and data-analytic systems that measure key automotive performance indicators for both new and in-use vehicles.
Earlier this month, XL entered a strategic partnership with Curbtender to jointly develop a series of all-electric and plug-in hybrid electric commercial trucks for use in waste management applications.
Last December, XL announced that it had completed its previously announced merger with Pivotal Investment Corporation II (PIC) for a cash transaction of approximately $350 million.
However, despite these positive developments, the company’s results for the third quarter ended September 30, 2020, are far from impressive. XL’s loss from operations has increased 56.9% year-over-year to $6.18 million in the third quarter ended September 30, 2020. Its net loss has increased 7.8% from the year-ago value to $5.63 million over the same period.
The stock has gained 97.1% over the past year, but it is currently trading 43.2% below its 52-week high of $35, indicating a mid-term bearishness.
XL’s poor prospects are also apparent in its POWR Ratings. The stock has an overall rating of F, equating to Strong Sell in our proprietary rating system. FSR has an F grade for both Growth and Value, and D for Stability, Quality and Sentiment. It is currently ranked #66 of 68 stocks in the Auto Parts Industry.
Click here to see the additional POWR Ratings for XL.
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VLDR shares fell $0.05 (-0.24%) in after-hours trading Wednesday. Year-to-date, VLDR has declined -7.76%, versus a 4.95% rise in the benchmark S&P 500 index during the same period.
About the Author: Rishab Dugar
Rishab is a financial journalist and investment analyst. His investment approach is to focus on quality stocks, trading at low prices, with business models that he readily understands. More...
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