Despite the current supply chain disruptions, chip shortages, and increase in commodity prices, the global electric vehicle (EV) market keeps expanding quickly. It is important to note that global EV sales were reported at 603,000 in January 2022, which is 87% more than a year ago, with a market share of 10% for January 2022.
Furthermore, the global EV industry is estimated to grow at a CAGR of 22.6% between 2020 and 2027, reaching $802.81 billion in the terminal year, driven by the growing demand for EVs along with government support through subsidies and tax rebates.
In this article, I am going to analyze and compare two EV companies, Cenntro Electric Group Ltd. (CENN) and Lordstown Motors Corp. (RIDE), to determine which stock currently presents a better buying opportunity.
CENN designs and produces electric light and medium-duty commercial vehicles. RIDE is an Ohio-based EV company that develops, manufactures, and markets its full-size pickup truck, known as Endurance, for fleet customers.
Year-To-Date (YTD), shares of CENN have plunged about 59%, and RIDE has lost around 1% over the same period.
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Recent Developments
On January 21st, Cenntro Electric declared that it had achieved a vital production milestone of 1,623 ECVs for 2021. Besides, the company made 628 ECVs in December 2021, which is Cenntro’s highest volume in a single month. The company will also expand its core U.S. operations in 2022. Later in March, the company announced the acquisition of 65% equity interest in Tropos Motors Europe. The deal was valued at €3.25 million, assuming 100% of a shareholder loan from Mosolf to Tropos Motors for €11.9 million. This acquisition aims to speed up Cenntro’s expansion within the EMEA region, providing substantial growth opportunities.
Recent Financial Performance
Cenntro Automotive hasn’t announced any financial reports after it was bought by Naked Brand Group Limited. CENN intends to report 2021 financial results in early April 2022. For now, let's consider the Naked Brand Group Limited 6-K report to evaluate Centro's performance for the first half of 2021 (page 168). In the first half of the year, the company's total revenue stood at $2.46 million due to sales of its ECVs in targeted markets. Besides, its gross margin increased to 18.3% in 1H2021, compared to 10.4% as of FY2020.
When it comes to expenses, CENN's overall operating costs were $4.98 million in 1H2021, primarily caused by higher Research and Development costs and General & Administrative expenses. It turned into CENN's net loss of $4.55 million.
After the merger completion, the company finished 2021 with cash on the balance of $250 million and without debt, which positions it to support the company's growth plans in 2022.
On February 28th, Lordstown Motors released its fourth-quarter earnings report. The company hasn't recognized any revenues in Q4 as it is still in the development stage, while its GAAP EPS came in at ($0.42), beating analysts' estimates by $0.30. The company’s total operating expenses were up 121% YoY to $84.66 million, driven by higher R&D and SG&A costs. Consequently, its net loss stood at $81.15 million, up 31.4% on a year-over-year basis.
The company plans to begin commercial production and sales of the Endurance of approximately 500 units in 2022, with as many as 2,500 units coming in 2023.
Currently, Wall Street expects Lordstown's EPS to grow 37.55% YoY to ($0.45) in the first quarter of 2022. Moreover, analysts project RIDE to generate its first notable revenue of $2.93 million in FQ3.
Comparing Options Market Sentiment
Looking at the May 20th, 2022 option chain for both CENN and RIDE, we can determine options market sentiment by comparing the calls/puts ratio. In CENN's instance, the open calls/open puts ratio at the $2.50 strike price comes in at 4.94x, implying a bullish options market sentiment. When it comes to RIDE, the open calls/open puts ratio at the $5.00 strike price stands at 6.67x, showing a relatively better market sentiment.
The Bottom Line
I believe that CENN is a better investment than RIDE at the moment. The company is already in the commercial stage, showing promising signs of its future commercial success. Moreover, CENN's recent acquisition of Tropos Motors Europe is estimated to enhance the company's capabilities and distribution network in EMEA, thus providing solid growth opportunities. Finally, CENN has strong bullish options market sentiment, indicating a possible share price appreciation in the forthcoming weeks.
CENN shares rose $0.03 (+1.37%) in premarket trading Friday. Year-to-date, CENN has declined -58.40%, versus a -4.07% rise in the benchmark S&P 500 index during the same period.
About the Author: Oleksandr Pylypenko
Oleksandr Pylypenko has more than 5 years of experience as an investment analyst and financial journalist. He has previously been a contributing writer for Seeking Alpha, Talks Market, and Market Realist.
Cenntro Electric Group vs. Lordstown Motors: Which EV Stock is a Better Buy? StockNews.com
