Lightning eMotors Inc. (ZEV) in Loveland, Colo., made its stock market debut on May 7, 2021, following a de-SPAC transaction with GigCapital3. With a comprehensive suite of control software, telematics, analytics, and charging solutions, the company designs, engineers, customizes, and builds zero-emission cars to cater to fleet customer needs. 

Last week, the ZEV’s shares gained 18.5% in price after the company announced a partnership with General Motors to become the first GM Specialty Vehicle Manufacturer to offer completely electric Class 3 through Class 6 commercial vehicles.

However, the stock has plunged 62.7% in price over the past year and 38.6% over the past three months. In addition, an ongoing investigation related to allegations the company has made misleading statements related to its operational performance, along with industry headwinds, make its prospects look bleak.

Click here to checkout our Electric Vehicle Industry Report for 2022

Here is what could influence ZEV’s performance in the upcoming months:

Industry Headwinds

Although leading automakers expect a near two-year semiconductor chip shortage to ease in the second half of 2022, automotive chipmakers forecast a prolonged recovery. The differing perspectives on the most pressing issue confronting the automobile industry serve to extend uncertainty about the industry’s recovery and risk impeding its efforts to shift to new, chip-intensive technologies such as electrification, safety, and driving-assist features.

Ongoing Investigation

ZEV reported its second-quarter 2021 financial results after the market closed on Aug. 16, 2021, posting a $0.79 net loss per share versus a $0.10 loss in the second quarter of 2020. The company also retracted its fiscal 2021 projection, noting that it “no longer expects to meet full-year expectations,” citing “chassis production disruptions” as one of the reasons. In response to the announcement, the company’s share price declined 16.93% on Aug. 17, 2021. The complaint alleges that the company made materially false and misleading statements throughout the Class Period and failed to disclose vital adverse facts regarding the company’s business, operations, and prospects.

Stretched Valuations

In terms of forward EV/Sales, the stock is currently trading at 13.71x, which is 626.8% higher than the 1.89x industry average. Also, its 207.74x  trailing-12-months Price/Book multiple is 7639.9% higher than the 2.68x industry average Also, ZEV’s 18.92x forward Price/Sales is 1122.6% higher than the 1.55x industry average.

Weak Profitability

ZEV’s trailing-12-months ROA, gross profit margin and levered FCF margin are negative 59.1%, 18.4%, and 217.8%, respectively. Furthermore, its trailing-12-month cash from operations stood at a negative $52.5 million, versus the $205.06 million industry average.

POWR Ratings Reflect Uncertainty

ZEV has an overall F rating, which equates to a Strong Sell in our proprietary POWR Ratings system. The POWR ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. ZEV has an F grade for Value and a D for Quality. The company’s higher-than-industry valuation is consistent with the Value grade. In addition, ZEV’s poor profitability is in sync with the Quality grade.

Among the 69 stocks in the F-rated Auto & Vehicle Manufacturers industry, ZEV is ranked #67.

Beyond what I have stated above, one can view ZEV ratings for Growth, Sentiment, Stability, and Momentum here.

Bottom Line

ZEV’s shares have plunged more than 50% in price over the past six months and are currently trading below its 50-day and 200-day moving averages of $5.79 and $7.51, respectively, indicating a downtrend. Furthermore, its negative profit margin does not justify its lofty valuation. So, we think the stock is best avoided now.

How Does Lightning eMotors Inc. (ZEV) Stack Up Against its Peers?

While ZEV has an overall F rating, one might want to consider its industry peers, Isuzu Motors (ISUZY) and Mazda Motors Corporation (MZDAY), which has an overall A (Strong Buy) rating, and Daimler AG (DDAIF), which has an overall B (Buy) rating.

Click here to checkout our Electric Vehicle Industry Report for 2022

ZEV shares fell $0.03 (-0.56%) in premarket trading Friday. Year-to-date, ZEV has declined -11.15%, versus a -5.25% 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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