Since last year, the auto industry has faced several challenges, such as supply disruptions, high inflation, and the Fed’s aggressive interest rate hikes. While auto sales are expected to return to pre-pandemic levels this year, I think auto stocks Lucid Group, Inc. (LCID), NIO Inc. (NIO), and Canoo Inc. (GOEV) are best avoided now, given their poor fundamentals and growth prospects.
Before we delve deeper into the fundamentals of these stocks, let’s discuss what’s going on in the automobile industry.
Auto sales were abysmal last year as vehicle sales dropped to their lowest level in more than a decade in the United States. An estimated 13.70 million to 13.90 million new vehicles were sold last year, representing a year-over-year decline of 8% to 9%. However, electric vehicles found more takers as sales accounted for 5.8% of all new cars sold in 2022, up from 3.1% in 2021.
Most analysts forecast auto sales to rise globally. In the United States, Cox Automotive forecasts U.S. new vehicle sales of 14.10 million in 2023, while S&P Global Mobility expects new vehicle sales to rise 7% to 14.80 million units in 2023. Global EV sales are expected to grow 29% year-over-year in 2023, reaching 12.10 million units.
However, worries over an impending recession, supply chain issues, and an overall fall in demand could continue to impact auto sales this year.
Considering these factors, investors should avoid LCID, NIO, and GOEV. Let’s see what’s shaping their prospects.
Lucid Group, Inc. (LCID)
LCID is a technology and automotive company that develops electric vehicle (EV) technologies. It designs, engineers, and builds electric vehicles, EV powertrains, and battery systems.
In terms of forward Price/Sales, LCID’s 12.14x is significantly higher than the 0.91x industry average. Its 10.97x forward EV/Sales is 824.3% higher than the 1.19x industry average. Likewise, its 7.17x forward P/B is 164.5% higher than the 2.71x industry average.
LCID’s loss from operations widened 54.4% year-over-year to $749.74 million for the fourth quarter ended December 31, 2022. Its net loss attributable to common stockholders narrowed 54.8% year-over-year to $472.65 million. The company’s net loss per share narrowed 56.3% year-over-year to $0.28. Also, its adjusted EBITDA loss widened 108.2% year-over-year to $623.61 million.
Analysts expect LCID’s EPS for the quarter ending March 31, 2023, to remain negative. It failed to surpass the consensus EPS estimates in each of the trailing four quarters. Over the past year, the stock has declined 61% to close the last trading session at $8.82.
LCID’s weak fundamentals are reflected in its POWR Ratings. The stock has an overall F rating, equating to a 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.
It has an F grade for Value, Stability, and Quality and a D for Growth and Sentiment. It is ranked last among 60 stocks in the Auto & Vehicle Manufacturers industry. Click here to see LCID’s rating for Momentum.
NIO Inc. (NIO)
Headquartered in Shanghai, China, NIO designs, manufactures and sells smart electric vehicles. It offers both smart electric sedans and electric SUVs with multiple seating options. The company also designs, develops, and produces e-powertrains, battery packs, and components.
In terms of forward Price/Sales, NIO’s 1.29x is 41.4% higher than the 0.91x industry average. Its 1.92x trailing-12-month EV/Sales is 59.2% higher than the 1.21x industry average. Likewise, its 6.57x forward P/B is 142.4% higher than the 2.71x industry average.
For the fiscal fourth quarter ended December 31, 2022, NIO’s adjusted loss from operations widened 193.7% year-over-year to RMB 6.02 billion ($869.29 million). Its adjusted net loss widened 190% year-over-year to RMB 5.07 billion ($732.11 million). The company’s adjusted loss per share widened 186.9% from the prior-year period to RMB 3.07.
For the quarter ending March 31, 2023, NIO’s EPS is expected to remain negative. It failed to surpass the Street EPS estimates in each of the trailing four quarters. Over the past year, the stock has declined 50% to close the last trading session at $9.31.
NIO’s POWR Ratings reflect this bleak outlook. The stock has an overall F rating, equating to a Strong Sell in our proprietary rating system.
It has an F grade for Stability and Sentiment and a D for Growth and Quality. It is ranked #54 in the same industry. To see the other ratings of NIO for Value and Momentum, click here.
Canoo Inc. (GOEV)
GOEV is a mobility technology company engaged in designing and developing electric vehicles (EVs). The company offers lifestyle delivery vehicles, lifestyle vehicles, multi-purpose delivery vehicles, and pickups. It also provides multi-purpose platform architecture, a self-contained, fully functional rolling chassis design to support various vehicle weight and ride profiles.
On February 6, 2023, GOEV announced that it had entered into definitive agreements with institutional investors to sell 50 million new shares at a discount, together with warrants that will give investors an option to buy up to 50 million shares more. By issuing new shares, the number of outstanding shares is going to increase by 50 million and 100 million.
In terms of forward Price/Sales, GOEV’s 204.91x is significantly higher than the 0.91x industry average. Likewise, its 226.25x forward EV/Sales is considerably higher than the 1.19x industry average.
GOEV’s loss from operations widened 2.2% year-over-year to $109.34 million for the third quarter ended September 30, 2022. Its net and comprehensive losses widened 45.5% year-over-year to $117.71 million. In addition, its loss per share widened 22.9% year-over-year to $0.43. Also, its adjusted EBITDA loss came in at $80.83 million.
Analysts expect GOEV’s EPS for the quarter ended December 31, 2022, to remain negative. It failed to surpass consensus EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 85.7% to close the last trading session at $0.70.
GOEV’s weak prospects are reflected in its POWR Ratings. The stock has an overall rating of F, equating to a Strong Sell in our proprietary rating system.
It has an F grade for Value, Stability, and Quality. Within the Auto & Vehicle Manufacturers industry, it is ranked #50. To see the other ratings of GOEV for Growth, Momentum, and Sentiment, click here.
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LCID shares were trading at $8.47 per share on Tuesday morning, down $0.35 (-3.97%). Year-to-date, LCID has gained 24.01%, versus a 4.86% rise in the benchmark S&P 500 index during the same period.
About the Author: Dipanjan Banchur
Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.
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