The electric vehicle (EV) industry’s growth is being harnessed by favorable government and private spending. For instance, the Bipartisan Infrastructure Law introduced the National Electric Vehicle Infrastructure (NEVI) Formula Program, which made $5 billion available over five years. This is expected to boost EV adoption.
Even after the incentives, EV prices still remain high, making them unaffordable for many. According to Kelley Blue Book estimates, the average price of a new EV is $66,000, up 4% from the previous month and up 14% from last year.
Also, it might take a while for EVs to own a significant share of new car sales. “The EV market is still very much in its infancy in terms of its business lifecycle — just 5% of all new car sales are currently electric vehicles,” said Tim Prescott, founder and editor of the automotive news site Certainly Cars. In addition, EV makers have been hit by high raw materials and production costs.
Given this backdrop, pricey EV stocks Rivian Automotive, Inc. (RIVN), NIO Inc. (NIO), and Lucid Group, Inc. (LCID) might be best avoided in this bearish market.
Rivian Automotive, Inc. (RIVN)
RIVN designs, develops, and manufactures EVs and sells them directly to consumer and commercial markets. The company’s offerings include five-passenger pickup trucks and sports utility vehicles.
On December 12, RIVN announced that it had paused its plans to produce commercial electric vans in Europe. It is expected to pursue no longer the memorandum of understanding with Mercedes-Benz, signed in September 2022.
In terms of its forward EV/Sales, RIVN is trading at 6.84x, 524.5% higher than the industry average of 1.10x. Its forward Price/Sales multiple of 13.36 is significantly higher than the industry average of 0.86.
RIVN’s total operating expenses increased 23.5% year-over-year to $857 million for the third quarter ended September 30, 2022. The company’s loss from operations widened 128.6% year-over-year to $1.77 billion.
Its adjusted net loss attributable to RIVN shareholders increased 85.2% year-over-year to $1.44 billion. In addition, its adjusted net loss per share came in at $1.57.
Analysts expect RIVN’s EPS for the first quarter ending March 2023 to decline 16.1% year-over-year to come at negative $1.66. For the same quarter, revenue is expected to come in at $872.66 million.
The stock declined 75.3% year-to-date to close the last trading session at $25.61. It lost 33.9% over the past three months.
RIVN’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. It is ranked #53 out of 61 stocks in the D-rated Auto & Vehicle Manufacturers industry. Click here to see the other ratings of RIVN for Growth, Momentum, and Sentiment.
NIO Inc. (NIO)
Headquartered in Shanghai, China, NIO markets smart electric vehicles. The company provides five, six, and seven-seater electric SUVs and smart electric sedans. In addition, it manufactures e-powertrains, battery packs, and components and offers sales and after-sales management activities.
In terms of its forward EV/Sales, NIO is trading at 2.53x, 130.7% higher than the 1.10x industry average. Its forward Price/Sales multiple of 2.79 is 226% higher than the industry average of 0.86.
NIO’s gross profit declined 12.9% year-over-year to $243.92 million in the fiscal third quarter ended September 30, 2022. The company’s total operating expenses increased 87.8% year-over-year to $787.99 million. In addition, its adjusted net loss per ADS attributable to ordinary shareholders increased by 486.1% from the prior-year period to $0.30.
Analysts expect NIO’s EPS for the fiscal fourth quarter ending December 2022 to decline 30.4% to come in at negative $0.28. Its revenue is expected to come in at $2.53 billion for the same quarter. It failed to surpass Street EPS estimates in three of the trailing four quarters.
The stock has plunged 63.5% over the past year and 42.6% over the past three months to close the last trading session at $12.49.
NIO has an overall F rating, translating to a Strong Sell in our POWR Ratings system. The stock has a D grade for Value, Sentiment, and Quality and an F for Stability. NIO is ranked #54 within the same industry.
Beyond what has been stated above, we have also given NIO grades for Growth and Momentum. Get all NIO ratings here.
Lucid Group, Inc. (LCID)
LCID is a technology and automotive company that develops EV technologies. It designs, engineers, and builds electric vehicles, EV powertrains, and battery systems.
LCID’s forward EV/Sales multiple of 17.56 is significantly higher than the industry average of 1.10. In terms of forward Price/Sales, it is trading at 18.92x, considerably higher than the industry average of 0.86x.
LCID’s loss from operations widened 38.3% year-over-year to $687.52 million for the third quarter ended September 30, 2022. Its total costs and expenses increased 77.6% year-over-year to $882.98 million.
LCID’s adjusted EBITDA loss widened 125.7% year-over-year to $552.90 million. Its net loss increased 1.1% year-over-year to $530.10 million for the same quarter. Its net loss per share attributable to common stockholders came in at $0.40.
For the fourth quarter ending December 2022, LCID’s EPS is expected to decline 45.6% year-over-year to negative $0.43. Street expects its revenue for the same quarter to come to $363.48 million. It failed to surpass Street EPS estimates in three of the trailing four quarters.
The stock has declined 78.2% year-to-date to close the last trading session at $8.28. Moreover, it declined 35.9% over the past month.
LCID’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 also has an F grade for Value, Stability, Sentiment, and Quality. Within the same industry, it is ranked #55.
To see the other ratings of LCID for Growth and Momentum, click here.
RIVN shares were trading at $25.35 per share on Tuesday afternoon, down $0.26 (-1.02%). Year-to-date, RIVN has declined -75.55%, versus a -14.49% rise in the benchmark S&P 500 index during the same period.
About the Author: Sristi Suman Jayaswal
The stock market dynamics sparked Sristi's interest during her school days, which led her to become a financial journalist. Investing in undervalued stocks with solid long-term growth prospects is her preferred strategy. Having earned a master's degree in Accounting and Finance, Sristi hopes to deepen her investment research experience and better guide investors.
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