The electric vehicle (EV) industry has encountered several challenges, including rising prices, a semiconductor chip shortage, and ongoing supply chain issues this year. These factors have affected the production of EV companies, making it challenging for them to fulfill the unmet demand.
Furthermore, the exorbitant pricing and insufficient charging infrastructure significantly impede EV adoption. While the number of charging stations is expanding across the country, thanks to government and business investments, the charging infrastructure still remains unsatisfactory for buyers.
Given this backdrop, we think fundamentally-weak EV stocks Rivian Automotive Inc. (RIVN), NIO Inc. (NIO), and Nikola Corporation (NKLA) are best avoided now.
Rivian Automotive Inc. (RIVN)
RIVN creates, develops, manufactures, and sells electric automobiles and accessories. It offers the Rivian Commercial Vehicle platform for electric Delivery Vans in conjunction with Amazon.com. The company sells its products directly to customers in the consumer and commercial markets.
During the second quarter ended June 30, 2022, RIVN’s revenue came in at $364 million. However, its operating expenses increased 73.1% from the year-ago value to $1 billion. Its operating loss grew 194.5% from the prior-year quarter to $1.71 billion. The company’s net loss surged 195.2% year-over-year to $1.71 billion. Its loss per share amounted to $1.89.
Analysts expect RIVN’s EPS to decline 31.7% per annum over the next five years. The stock has declined 15.1% over the past six months and 67.3% year-to-date.
RIVN's POWR Ratings are consistent with this bleak outlook. The stock has an overall rating of F, which translates 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.
RIVN has been graded an F for Stability, Value, and Quality. Within the D-rated Auto & Vehicle Manufacturers industry, it is ranked #62 of 64 stocks.
To see additional POWR Ratings for Growth, Sentiment, and Momentum for RIVN, click here.
NIO Inc. (NIO)
Shanghai, China-based NIO is a global pioneer and market leader in the premium smart electric vehicle market. It creates, designs, develops, co-manufactures, and sells premium smart electric vehicles while advancing next-generation technologies such as autonomous driving, digital technology, electric powertrains, and batteries.
NIO’s total revenue increased 21.8% year-over-year to RMB10.29 billion ($1.54 billion) for the second quarter ended June 30, 2022. However, its operating loss increased 272.8% from the year-ago value to RMB 2.85 billion ($424.83 million).
Its net loss surged 316.4% from the prior-year quarter to RMB 2.75 billion ($409.82 million). Its loss per share grew 300% year-over-year to RMB 1.68.
Its EPS is expected to remain negative in the current and next year. The stock has declined 61.8% over the past year and 21% over the past month.
NIO's weak fundamentals are reflected in its POWR ratings. The stock has an overall F rating, equating to a Strong Sell in our POWR Ratings system. The stock has a D grade for Stability, Value, and Quality. In the same industry, it is ranked #50.
In addition to the POWR Rating grades I have just highlighted, you can see NIO ratings for Momentum, Growth, and Sentiment here.
Nikola Corporation (NKLA)
Nikola Corporation is a technology innovator and integrator specializing in energy and transportation solutions. It operates in two segments: Truck and Energy. In addition, the company collaborates with its business partners and suppliers to construct, integrate, and commission its vehicles.
NKLA's total revenue came in at $18.13 million for the second quarter ended June 30, 2022. However, its operating loss grew 24.5% from the prior-year quarter to $172.23 million. The company’s net loss surged 20.8% from the year-ago value to $172.99 million. Its loss per share grew 13.9% year-over-year to $0.41.
Street expects its EPS to decline 54.4% in the current year and 72.7% in the current quarter ending September 2022. The stock has declined 69.5% over the past year and 37.1% over the past month.
NKLA’s poor prospects are apparent in its POWR Ratings. The stock has an overall F rating, which equates to a Strong Sell in our proprietary rating system.
It also has an F grade for Quality and Stability and a D for Value. NKLA is ranked #57 in the same industry.
Click here to see the additional POWR Ratings for NKLA (Momentum, Sentiment, and Growth).
RIVN shares were trading at $30.95 per share on Monday afternoon, down $3.00 (-8.84%). Year-to-date, RIVN has declined -70.15%, versus a -23.05% rise in the benchmark S&P 500 index during the same period.
About the Author: Pragya Pandey
Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate.
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