Global demand for electric vehicles (EVs) held strong and sales saw a sharp upward trajectory in 2020 even during COVID-19 lockdown restrictions. EV sales have continued to increase in 2021 with certain brands leading the way in product offerings and in administering online sales.
While Tesla, Inc. (TSLA) has been stealing all the headlines, several new EV players have been established and are seeking to bring stiff competition to the EV juggernaut. Not all new entrants possess sufficient fundamental strength to succeed amid intense competition, however. While the EV behemoths are rapidly scaling up, many new players have yet to expand their production capacity to meet the growing demand. Furthermore, some of these companies lack adequate financial strength to justify their premium valuations.
Now that major auto manufacturers are also entering the EV space, the market will likely get even tougher for emerging EV players like XPeng Inc. (XPEV), Li Auto Inc. (LI), and Workhorse Group Inc. (WKHS). With investor concerns over the overvaluation and poor near-term growth prospects, these stocks have declined year-to-date.
XPeng Inc. (XPEV)
Headquartered in Guangzhou, China, XPEV is a manufacturer and marketer r of smart electric vehicles in China and the U.S. The company’s portfolio includes SUVs under the G3 name, and a four-door sports sedan under the P7 name. It also offers vehicle leasing, bank loans, and auto insurance services.
Last month, XPEV delivered 2,223 Smart EV, comprising 1,409 P7s and 814 G3s. This represented a 63% decline from the company’s record-breaking delivery numbers for January. It reflects a seasonal decline in deliveries due to the week-long Chinese New Year holiday.
Also in February, the company delivered its second batch of more than 200 G3 smart electric SUVs for the Norwegian market. The delivery marked another step towards XPEV’s long-term commitment to establishing an international presence.
XPEV’S general and administrative expenses increased 320.8% year-over-year to RMB1,203.8 million in the third quarter, ended September 30, 2020. The company’s non-GAAP loss from operations was RMB822.6 million and its non-GAAP net loss was RMB864.9 million. Also, it reported a non-GAAP loss per share of RMB2.16 over this period.
The company’s EPS is expected to decline at a rate of 5.2% per annum over the next five years. The stock has declined 26.5% year-to-date, and it is currently trading 57.7% below its 52-week high of $74.49, indicating short-term bearishness. In terms of trailing-12-month price/sales, XPEV is currently trading at 15.58x, 1015.4% higher than the industry average 1.40x.
XPEV’s POWR Ratings are consistent with this bleak outlook. The stock has an overall rating of F, which translates to 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.
XPEV has an F grade for Stability, and a D grade for Value and Quality. Of 52-stocks in the B-rated Auto & Vehicle Manufacturers industry, it is ranked #45.
In addition to the POWR Ratings grades I’ve just highlighted, you can see the XPEV ratings for Growth, Momentum, and Sentiment.
Li Auto Inc. (LI)
Formerly known as Leading Ideal Inc., LI designs, manufactures and sells smart electric sport utility vehicles (SUVs) in China. The company offers Li ONE, a six-seat electric SUV equipped with a range of extension systems and smart vehicle solutions.
Last month, the company delivered 2,300 Li ONEs, representing a 755% year-over-year increase. However, the number represented a 57.2% decline versus January’s ’s 5,379 Li ONE deliveries. The decline was due to seasonal factors related to the Chinese New Year holiday and localized COVID-19 outbreaks in northern China.
Last December, LI priced a follow-on offering of 47 million American depositary shares at $29.00 per ADS. It expects to use the offering’s proceeds to develop next-generation EV technologies and autonomous driving technologies.
LI’s vehicle margin was 17.1% in the fourth quarter, ended December 31, 2020, compared with 19.8% in the third quarter of 2020. Its non-GAAP loss from operations was RMB71.1 million. Its gross margin declined 2.3% sequentially to 17.5%, while its operating expenses increased 18.7% sequentially to RMB803.5 million over this period.
The stock has declined 17.7% year-to-date, and it is currently trading 50.2% below its 52-week high of $47.7, indicating short-term bearishness. Moreover, the stock appears to be extremely overvalued currently. In terms of its trailing-12-month ev/sales, LI is currently trading at 12.91x, 640.8% higher than the industry average 1.74x.
LI’s weak prospects are apparent in its POWR Ratings also. The stock has an overall rating of D, equating to a Sell in our proprietary rating system. LI also has a D grade for Value and Quality, and an F for Stability. In the same industry, the stock is ranked #42.
To see additional POWR Ratings for Growth, Sentiment, and Momentum for LI, click here.
Workhorse Group Inc. (WKHS)
Formerly known as AMP Holding Inc., WKHS manufactures and sells battery-electric vehicles and aircraft in the United States. The company sells electric and range-extended medium-duty delivery trucks under the Workhorse brand and develops telematics performance monitoring systems that enable fleet operators to optimize energy and route efficiency.
On March 1, the Schall Law Firm announced that it is investigating WKHS for violations of the securities laws on behalf of its shareholders. Bronstein, Gewirtz & Grossman, LLC and Rosen Law Firm have also announced lawsuits resulting from allegations that WKHS issued misleading business information to the shareholders.
WKHS’s general and administrative expenses increased 30.6% year-over-year to $4.7 million in the fourth quarter, ended December 31, 2020. The company’s net income was $280.5 million, compared with a net income of $655,000 in the fourth quarter of 2019. Its cost of goods sold increased 233.3% year-over-year to $7.0 million due to increased production payroll and warranty expense.
A consensus EPS estimate for the current year represents a 158.6% decline year-over-year. The stock has declined 18.5% year-to-date and is currently trading 62.5% below its 52-week high of $42.96, indicating short-term bearishness. Further, in terms of trailing-12-month price/sales, WKHS is currently trading at 1850.59x, which is significantly higher than the industry average 1.40x.
WKHS’s weak fundamentals are reflected in its POWR Ratings. The stock has an overall rating of F, which equates to Strong Sell in our POWR Ratings system. WKHS has an F grade for Value, Stability, and Quality. In the same industry, the stock is ranked #51.
In total, we rate WKHS on eight different components. Beyond what we stated above we have also given WKHS grades for Momentum, Growth, and Sentiment. Get all the WKHS ratings here.
The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.
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XPEV shares were trading at $32.20 per share on Wednesday morning, up $0.70 (+2.22%). Year-to-date, XPEV has declined -24.82%, versus a 2.86% rise in the benchmark S&P 500 index during the same period.
About the Author: Imon Ghosh
Imon is an investment analyst and journalist with an enthusiasm for financial research and writing. She began her career at Kantar IMRB, a leading market research and consumer consulting organization. More...
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