The automobile sector suffered a major setback amid the COVID-19 pandemic as several travel restrictions were imposed to contain the spread of the deadly virus. However, with growing concerns about climate change, governments around the globe are taking measures to transition to sustainable-energy-based futures. This, along with higher efficiency, has been driving growing optimism about the EV sector’s prospects.
The global EV market is expected to grow at a CAGR of 40.7% between 2020 -2027. However, the EV space has become overcrowded with several new companies entering the industry to capitalize on its immense growth potential. And based solely on investor optimism, the shares of many of these new players skyrocketed last year despite the companies’ lack of product portfolios or pipelines.
NIO, Inc. (NIO), Li Auto, Inc. (LI), XPeng, Inc. (XPEV), and Workhorse Group, Inc. (WKHS) gained significantly last year. But considering their bleak near-term growth prospects investors have started closing out their long positions in these stocks. As a result, these names are currently in price correction mode. We don’t expect the direction of the price movements for these stocks to change in the near term. So, we think it would be wise to avoid these stocks for now.
NIO, Inc. (NIO)
Known as the ‘Tesla of China’ NIO designs, manufactures and sells smart and connected EVs integrated with next generation technologies and artificial intelligence. The company’s products include its EP9 supercar and ES8 7-seater SUV. The company provides users with home charging, power express valet service, and other power solutions including access to public charging, access to power mobile charging trucks, and battery swapping. The stock has lost 21.8% year-to-date and closed Friday’s trading session at $38.11.
According to a letter of intent filed by JAC Motors with the Shanghai Stock Exchange on March 5, 2021, NIO and its contract manufacturer, JAC Motors, are expected to create a joint venture to build intelligent EVs, among other products. The company also launched its first autonomous driving model, NIO ET7 on January 9.
NIO closed a $1.50 billion senior convertible notes offering on January 19, which consisted of $750 million of convertible notes due 2026 and $750 million of convertible notes due 2027. NIO is expected to use the proceeds of the offerings for general corporate purposes and to strengthen its cash and balance sheet positions.
NIO’s non-GAAP loss from operations came in at $133.50 million for the fourth quarter ended December 31, 2020. The company’s non-GAAP net loss was $203.60 million, representing an increase of 33.1% sequentially. NIO’s non-GAAP net loss per American Depository Share (ADS) was $0.14. Analysts expect the company’s EPS to remain negative for fiscal 2021.
NIO’s 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 an F grade for Stability and D for Value, Quality and Sentiment. We have also graded NIO for Growth and Momentum. Click here to access all of NIO's ratings.
NIO is ranked #85 of 87 stocks in the D-rated China group.
Li Auto, Inc. (LI)
Headquartered in Beijing, China, LI is engaged in the design, development, manufacture and sales of smart electric sport utility vehicles (SUVs). The company offers Li ONE, which is a six-seat electric SUV equipped with a range of extension systems and smart vehicle solutions. LI sells peripheral products and provides related services, such as charging stalls, vehicle internet connection services and extended lifetime warranties. The stock has lost more than 22% year-to-date and closed Friday’s trading session at $22.46.
On March 2, LI announced that it had delivered 2,300 Li ONEs in February, representing a 755% year-over-year increase in deliveries. However, the February deliveries were affected by localized COVID-19 outbreaks in northern China. The company announced the establishment of a new research and development center in Shanghai on February 1 dedicated to the development of cutting-edge EV technologies. LI’s Li ONE achieved a G rating, the highest safety rating per safety evaluation results published by the China Insurance Automotive Safety Index Management Center in January.
However, LI’s non-GAAP loss from operations was $10.89 million for the fourth quarter, ended December 31, 2020, which represents a 57.9% rise sequentially. Its gross margin fell from 19.8% for the third quarter of 2020 to 17.5% for the fourth quarter. Its vehicle margin also decreased, to 17.1% for the fourth quarter from 19.8% in the third quarter of 2020. LI’s total operating expenses increased 18.7% sequentially to $123.15 million. Analysts expect the company’s EPS to remain negative for fiscal 2021.
LI’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 Stability, and D for Value, Quality and Growth. We have also graded LI for Sentiment and Momentum. Click here to access all LI's ratings.
LI is ranked #43 of 52 stocks in the B-rated Auto & Vehicle Manufacturers Industry.
XPeng, Inc. (XPEV)
Based in China, XPEV is engaged in the design, development, production and sale of smart EVs. The company offers a type of sport utility vehicle — G3--and a type of four-door sports sedan—P7. The company also delivers a range of services to its clients, including a supercharging service, maintenance service, ride-hailing service and vehicle leasing service. The stock has lost 34.6% year-to-date and closed Friday’s trading session at $28.03.
XPEV plans to launch a long-distance navigation-assisted autonomous driving expedition March 19 to 26 that will cover a total distance of 3,675 km across six provinces in China. XPEV also expanded its product offering on March 3. It launched three new vehicle versions, including the rear-wheel drive (RWD) P7 Standard Range Smart and Premium models, and the G3 460c model, which is powered by lithium iron phosphate (LFP) batteries.
However, the company’s non-GAAP loss from operations was $160.36 million for the fourth quarter ended December 31, 2020. XPEV’s non-GAAP net loss was $109.21 million. In addition, its non-GAAP net loss per ADS came in at $0.15 for the quarter. Analysts expect the company’s EPS to remain negative for fiscal 2021.
XPEV’s uncertain prospects are reflected in its POWR Ratings. The stock has an overall rating of F, which translates to a Strong Sell in our proprietary rating system.
The stock has an F grade for Stability, and D for Value, Sentiment, Quality and Growth. Click here to access all XPEV’s ratings.
XPEV is ranked #46 in the Auto & Vehicle Manufacturers Industry.
Workhorse Group, Inc. (WKHS)
Headquartered in Loveland, Ohio, WKHS is a technology company focused on providing solutions to the commercial transportation sector. The company designs and builds high performance EVs and aircraft and develops cloud-based, real-time telematics performance monitoring systems. WKHS is an original equipment manufacturer (OEM) of Class 3-6 commercial-grade, medium-duty trucks. The company sells its vehicles to fleet customers directly and through its primary distributor, Ryder System, Inc. (R). The stock has lost 30.6% year-to-date and closed Friday’s trading session at $13.73.
The company received a purchase order for 6,320 C-Series all-electric delivery vehicles from Pride Group Enterprises in January 2021. The order is split between WKHS’ C-1000 and C-650 models and is subject to various production and delivery conditions. However, on March 5, Rosen Law Firm, a global investor rights law firm, announced an investigation of securities claims on behalf of shareholders of WKHS. The shareholders allege that the company may have issued materially misleading business information to the investing public.
The company’s selling, general and administrative expenses increased by 30.6% year-over-year to $4.70 million for the fourth, quarter ended December 31, 2020. This can be attributable primarily to higher incentive stock compensation and consulting costs. WKHS’ interest expense decreased by 12.5% year-over-year to $4.90 million, due mainly to a decrease in the fair value of the company’s convertible notes. Analysts expect the company’s EPS to remain negative for fiscal 2021.
WKHS’ POWR Ratings are consistent with this bleak outlook. The stock has an overall rating of F, which equates to Strong Sell in our proprietary rating system.
The stock also has an F grade for Stability, Value, Sentiment, Quality and Growth. We have also graded WKHS for Momentum. Click here to access all of WKHS’ ratings.
WKHS is ranked #51of 52 stocks in the Auto & Vehicle Manufacturers Industry.
The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.
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NIO shares fell $0.06 (-0.17%) in after-hours trading Monday. Year-to-date, NIO has declined -27.76%, versus a 2.10% 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.4 Electric Vehicle Stocks Down More Than 20% in 2021 appeared first on StockNews.com