The auto industry has been struggling amid widespread macroeconomic headwinds. Rising rates and high inflation have grossly added to the industry's woes.
According to Cox Automotive, total used-vehicle sales in November 2022 are estimated to be nearly 2.70 million units, down 4.5% year-over-year. Moreover, retail used-vehicle sales are estimated to be 1.40 million, down 3.7% year-over-year.
In addition, Charles Chesbrough, senior economist at Cox Automotive, believes, "Higher interest rates are constraining affordability, and the number of potential buyers is in decline." Moreover, disruptions in supplies of key raw materials and components are still a significant issue the industry is battling.
Given the backdrop, fundamentally weak auto stocks Lucid Group, Inc. (LCID) and Mullen Automotive Inc. (MULN) might be best avoided.
Lucid Group, Inc. (LCID)
Technology and automotive company LCID develops electric vehicle (EV) technologies. The company creates electric vehicles, EV powertrains, and battery systems.
LCID's forward EV/Sales multiple of 15.83 is substantially higher than the 1.09 industry average. Also, its forward Price/Sales multiple is trading at 17.21, substantially higher than the industry average of 0.85.
LCID's trailing-12-month ROCE of negative 46.49% is lower than the industry average of 12.92%, while its trailing-12-month negative ROTA of 27.26% is lower than the industry average of 4.38%.
LCID's total cost and expenses came in at $882.98 million for the third quarter that ended September 30, 2022, up 77.6% year-over-year. Its loss from operations came in at $687.52 million, up 38.2% year-over-year. Moreover, the company's net loss came in at $670.25 million, up 27.8% year-over-year.
Analysts expect LCID's EPS to decrease 95.2% year-over-year to a negative $0.41 for the quarter ending December 2022. Over the past year, the stock has lost 81.7% to close the last trading session at $7.45.
LCID's poor fundamentals are reflected in its POWR Ratings. The stock's overall F rating is a Strong Sell in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
LCID has an F in Value, Quality, Stability, and Sentiment. Within the D-rated Auto & Vehicle Manufacturers industry, it is ranked #56 out of 62 stocks. Click here to see the additional POWR Ratings for Momentum and Growth for LCID.
Mullen Automotive Inc. (MULN)
MULN is an electric vehicle manufacturer and distributor. Additionally, it runs the digital platform CarHub, which uses AI to give a user-friendly way to buy, sell, and own a car. It sells battery technology and emergency point-of-care solutions.
MULN's trailing-12-month Price/Book multiple of 8.18 is 314.4% higher than the 1.97 industry average.
MULN's trailing-12-month negative ROTC of 618.14% is lower than the 6.59% industry average. Its trailing-12-month ROTA of negative 169.94% is lower than the 4.38% industry average.
MULN's loss from operations came in at $18.22 million for the third quarter that ended June 30, 2022, up 184.5% year-over-year. Its net loss came in at $59.47 million, up 289.9% year-over-year. In addition, its general and administrative expenses came in at $10.90 million, up 121.2% year-over-year.
Over the past year, the stock has lost 94.3% to close the last trading session at $0.31.
MULN overall F rating equates to a Strong Sell in our POWR Ratings system. It also has an F grade for Value and Stability and a D for Sentiment and Quality.
MULN is ranked #57 in the Auto & Vehicle Manufacturers industry. Click here to access the additional POWR Ratings for MULN (Growth and Momentum).
LCID shares were trading at $7.22 per share on Friday afternoon, down $0.23 (-3.09%). Year-to-date, LCID has declined -81.02%, versus a -18.69% rise in the benchmark S&P 500 index during the same period.
About the Author: RashmiKumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.
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