EV Flop, which of these four will drop to zero: Lucid, Fisker, Polestar, or Rivian
At the peak of the stock market sell-off last year, Tesla company (TSLA) looks like it will trade below $100 in 2023. But that didn’t happen. At the time, concerns were growing that X, formerly known as Twitter, might distract the CEO Elon Musk’s leadership in an electric vehicle (EV) company. I remember thinking Tesla’s price cuts would crush its profit margins.
TSLA stock bottomed at $101.81 and trades at a high of nearly $300 ($299.29 to be exact) in 2023. The price cuts have incentivized consumers to not only consider a Tesla, but buy one as well. But the recent price cut has lost its magic in lifting Tesla shares. Despite crushing competitors, the cost is that its margins will decline.
Tesla still has a leadership advantage in electric vehicles for more than a decade. Other companies should use it Charging network, enriching Tesla.
With pricing pressure mounting and consumers scoffing at buying EVs at six-figure prices, which EV stocks will drop to zero? Fisker Inc. owns (FSR) is an affordable electric car on the market, but Tesla may produce a €25,000 electric car outside of Germany. Which company(s) are at risk of bankruptcy?
In no particular order, we start with the Lucid Group.
1/ Lucid Group, Inc. (LCID)
Premium Alpha subscribers had already seen the warning about LCID stock before the huge losses recorded last quarter.
Lucid reported a notable decline in revenue, down 29.5% year over year to $137.8 million. It lost 28 cents per share after delivering 1,457 vehicles in the third quarter. The company lowered its production forecast for 2023. It targeted a production of 8,000 to 8,500 cars, compared to 10,000 cars previously.
Bears have a short interest of 25.16% against LCID shares. It has an Alpha quantitative rating of “Sell”. The stock has a grade of “A”:
Given that Lucid reported total liquidity of $5.45 billion (Slide 5), how likely is bankruptcy in the coming years? The company began production of the real all-wheel drive Lucid Air Pure car. It unveiled the Gravity SUV in November 2023. It wants to capture the most popular SUV segment with weak consumer interest in cars. Lucid will begin production of the Gravity SUV in late 2024. This will require more capital expenditures and marketing costs. Expect a negative increase in cash flow next year.
When asked when Lucid would expand its operations and become a profitable company, xx Sherry House pointed to its cost control and efficiencies program. These are standard buzzwords that don’t explain how Lucid achieves unit sales growth at lower costs.
Lucid has a great chance of trading towards zero. A stock price of $0 also means 99 cents in my book. Many pre-bankruptcy companies like WeWork (WE) and Lordstown Motors were trading in this range before the trading halt.
2/ Fisker Company (FSR)
The selling accelerated when Fisker stock failed to hold the support price of $6.00. Short sellers have a short interest of 44.6% against the stock. The panic accelerated when the company delayed its financial results for the third quarter of 2023. It will report earnings on November 13, 2023, after the market closes. user Who dat He pointed out that “the electric car maker said that the delay was due to the departure of its previous chief accounting officer on October 27 and the appointment of his replacement on November 6.”
Fisker would have published the results on October 26, one day before the departure of the Central Auditing Office.
Fisker has distracting side projects that do not increase the target market or increase sales. For example, I opened a lounge in Shanghai, China. China is home to highly competitive electric vehicle companies struggling to survive. Nio (NIO) has NIO House: Beyond a Showroom. XPeng (XPEV) has a VIP lounge. However, Chinese consumers are losing out on their savings in the post-pandemic economy. Their home values go down. Real estate represents at least 30% of China’s national GDP and 80% of household wealth, according to Gavical’s research.
Now that meme trades are rare due to tight credit conditions and weak markets for small stocks, Fisker stock has a great chance of trading toward zero next. In June, it burned through $88.2 million. It has $467.5 million in cash and cash equivalents remaining.
3/ Polestar Automotive Holdings UK Limited (PSNY)
Polestar is one of five stocks I chose to sell as a tax-loss sale begins. It also has a quantitative score warning of poor performance. The company’s profitability is weak:
The line in red shows that FSR shares are fading quickly. The high interest rate environment is destroying FSR stock, which has a -379% return under the S&P 500 (SP500).
Polestar is owned by Geely Automobile Holdings Limited (OTCPK:GELYY), a Chinese company. Rising trade tensions between the US and China could hurt Polestar’s business in the US, as Volvo’s ( OTCPK:VOLVF ) ownership of the company confuses Polestar’s customer base. They might consider a Volvo EV instead of a Polestar. Will Volvo promote the Polestar EV equally with its own cars?
Polestar reported an adjusted net loss of $318 million. Revenue grew 40.8% year over year to $613 million. It ended the third quarter with cash and cash equivalents of $951 million. After losing $735.0 million in the first nine months ending September 30, 2023, its survival is in doubt. In the third quarter, it recorded an operating loss of $261.2 million. Selling, general and administrative expenses increased by 32% to reach $236.2 million.
Gross profit fell 63% to $36.3 million, impacted by higher manufacturing, warranty and shipping costs, irregular supplier charges related to batteries and semiconductors, and further inventory declines.
4/ Rivian Automotive Company (Raven)
Electric truck supplier Rivian appeared at the open after posting third-quarter results, but fell to $17.00 by the end of the day.
The stock initially rose, breaking the decline in the electric vehicle sector. Rivian has amended its exclusivity agreement with Amazon (AMZN). This increases its total addressable market, or TAM, allowing it to sell commercial trucks to other customers.
Markets are skeptical. The U.S. Postal Service has selected Oshkosh (OSK) to supply its next generation of delivery vehicles in 2022. These vehicles include battery electric vehicles as well as those with low-emission internal combustion engines.
Competition for electric trucks is increasing. Ford (F) introduced the Lightning Truck EV. These days, factory modifications, expanded quality inspections, and the infeasibility of using an electric truck over a gas-powered truck are hurting Ford.
Rivian has to contend with the impending release of the Tesla Cybertruck.
In the third quarter, Rivian lost $1.19 per share. Revenue grew 150% year over year to $1.34 billion. More importantly, it raised its total production guidance to 54,000 units. In this period, net cash used in operating activities decreased to $877 million (page 11). This is less than $1,368 million last year. Rivian ended the third quarter with $9.133 billion in cash and cash equivalents.
This quarter, Rivian lost $1.44 billion. At this burn rate, the company needs to reduce its LCNRV – lower cost or net realizable value. This improved by about $2,000.
Fears of a recession, which could hurt demand for electric vehicles, could lead to lower commodity costs. This improves Rivian’s R1 material cost per unit. In addition, it is well placed to renegotiate lower supplier prices from here.
RIVN stock is unlikely to trade toward zero. It has upcoming consumer and commercial market opportunities. It can easily raise money to finance increased operating costs.
Two big opportunities emerge
Electric vehicle investors should keep an eye on the lithium mining and battery market. Competition in the automotive market will intensify but the need for source materials and related technologies will increase. Albemarle (ALB) investors had been expecting the company’s guidance to be cut as demand for electric vehicles weakened last year. Solid Power (SLDP), which has fallen more than 40% since March 2023, is up 10% at the time of writing. The battery developer’s loss of $0.08 on EPS and revenue of $6.4 million is not material. Look instead at the progress you’ve made.
On the conference call, Solid Power said it shipped more than 80 EV cells to BMW (OTCPK:BMWYY) in the third quarter. Once the sample is validated, BMW will use these cells in its full-size electric cars next year. The company will increase the production of electrolyte powder. By the end of the year, 1.25 metric tons will be produced per month. It has already supplied samples to two potential customers.
While EV TAM is shrinking for everyone except Tesla, Solid Power is expanding its market globally. It will work to consolidate its presence in Korea and upgrade its supply chain. During the quarter, it worked with its suppliers to address root causes to address classroom material issues.
SLDP stock has the potential to reward investors as major players support sulfide-based solid-state batteries.
All of the electric car companies mentioned have high risks. They all have a strong chance of trading to or toward zero. Among electric vehicle choices, Tesla is the undisputed leader in buy and hold. Among the other four companies, Rivian is the second most attractive company to buy. It’s focused on the EV truck segment, which has a good chance of getting ahead of Tesla’s Cybertruck. More importantly, consumers may find it more attractive than the Ford (F) Lightning, General Motors (GM) Silverado EV, and Ram 1500 Ramcharger made by Stellantis (STLA).
The electric vehicle “flop” has a broad aura that drags suppliers down. Lithium companies, such as Albemarle, have declined sharply. Investors now fear it may lose market share to China. Battery developers like Solid Power traded dangerously low to $1.20. However, BMW’s continued development and validation represents a hidden opportunity for EV investors. Sample EV cell shipments will power a full-size BMW EV in 2024, the company said.
Editor’s Note: This article discusses one or more securities that are not traded on a major U.S. exchange. Please be aware of the risks associated with these stocks.