Chronicle Journal: Finance

Steer Clear of These 3 Electric Vehicle Stocks

EV players such as Electrameccanica Vehicles (SOLO), Hyliion Holdings (HYLN) and Velodyne Lidar (VLDR) are very susceptible to pullbacks because they have been riding an ongoing EV wave absent a strong base of robust fundamentals. With the EV space now starting to get crowded with new players, it is reasonable to expect that market forces will inevitably shakeout those companies that can deliver positive returns and those that cannot.

According S&P’s Global Market Intelligence, global passenger EV sales are expected to increase to 6.2 million units by 2024, which is almost three times higher than the volume sold in 2019. Key factors, such as an increase in demand for environment-friendly, high-performance, and low-emission vehicles along with stringent government rules and regulations toward vehicle emission, are expected to boost the performance of EV stocks. However, the EV space is starting to get crowded with new players, and not all these players have the potential to deliver positive returns.

Some of the new companies that have gained significantly on market hype lately still do not have winning products or convincing financials. These companies may witness a pullback as the market values them correctly over time.

Electrameccanica Vehicles Corp. (SOLO), Hyliion Holdings Corp. (HYLN) and Velodyne Lidar, Inc. (VLDR) are three stocks we think lack sufficient fundamental strength to justify their price levels. In fact, analysts expect these companies to witness earnings declines in the coming quarters. So, it is advisable to avoid these stocks.

Electrameccanica Vehicles Corp. (SOLO)

SOLO is a designer and manufacturer of environmentally efficient electric vehicles, operating in two segments — Electric Vehicles and Custom Build Vehicles. The company’s flagship product includes a purpose-built, single-seat, three wheeled Electric Vehicle called the SOLO, designed exclusively for urban commuters.

On October 29, SOLO announced that it will expand its retail footprint by opening six new retail locations across the western US within the next month. It also announced that the initial shipment of its production vehicles for its flagship SOLO electric vehicles have arrived in the United States. We think this vehicle rollout strategy will allow the company to meet increasing demand.

SOLO’s revenue has increased 50% year-over-year to CAD$0.30 million in the third quarter ended September 30. However, the company’s gross profit has declined 84.5% from the year-ago value to CAD$10,201. It reported a net loss of CAD$14.90 million over this period.

The consensus EPS estimate for the next quarter ending March 31, 2021 indicates a 150% decline year-over-year. Also, SOLO missed the Street EPS estimates in three of the trailing four quarters.

The consensus revenue estimate of $220,000 for the current quarter ending December 31 represents a 1.9% decline from the same period last year. The stock has gained 218.6% year-to-date but is currently trading 49.6% below its 52-week high.

SOLO’s POWR Ratings are consistent with this bleak outlook. It has an overall rating of “Sell” with a “D” for Trade Grade and Peer Grade, and an “F” for Buy & Hold Grade. In the 34-stock Auto & Vehicle Manufacturers industry, it is ranked #30.

Hyliion Holdings Corp. (HYLN)

HYLN is a designer and developer of electrified powertrain solutions for the commercial transportation industry. The company offers battery management systems for hybrid and fully electric vehicle applications.

On October 15, the company announced a strategic partnership agreement with American Natural Gas that will provide HYLN’s customers discounted pricing for renewable natural gas at ANG fueling stations across the country. This could allow HYLN to reduce costs and offer its customers refueling stations where they are needed.

HYLN’s net cash provided by financing activities declined 8.3% year-over-year to $12.35 million for the nine months ended September 30. The company reported a net loss of $20 million over this period, and a loss per-share of $0.76.

The consensus EPS estimate for the next year indicates a 22.6% decline year-over-year. The stock has gained 73.4% year-to-date but is currently trading 70.5% below its 52-week high.

HYLN’s poor prospects are reflected in its POWR Ratings. It has a “Sell” rating, with a “C” for Industry Rank, a “D” for Peer Grade, and an “F” for Trade Grade and Buy & Hold Grade. It is ranked #17 out of 20 stocks in the Trucking Freight industry.

Velodyne Lidar, Inc. (VLDR)

VLDR is involved in the development and production of lidar sensors for use in industrial, 3D mapping, drones, and automotive applications in the United States and internationally. The company’s products are used in applications such as autonomous vehicles, mapping, industrial automation, self-driving rovers, smart city initiatives, and robotics.

VLDL recently announced a three-year sales agreement with Baidu, Inc. (BIDU) for its Alpha Prime lidar sensors. VLDR also introduced the Velarray M1600, an innovative solid state lidar sensor designed to serve mobile robotic applications. This launch could boost its product portfolio and help meet the needs of a wide range of industries.

On December 1, VLDR announced a collaboration with Ford Otosan for product development and testing of autonomous heavy commercial trucks. This could help VLDR deliver high performance autonomous driving technology and stand out in the market.

VLDR’s revenue has increased 137% year-over-year to $32.10 million in the third quarter ended September 30. The company reported a $5.30 million net loss over this period, and a loss per share of $0.04. The stock has gained 96% year-to-date but is currently trading 19.9% below its 52-week high.

VLDR’s POWR Ratings reflect its poor prospects. The company is assigned a “Neutral” rating. It also has a “C” for Trade Grade in addition to a “D” for Buy & Hold Grade and Peer Grade. Within the 61-stock Industrial – Machinery group, it is ranked #45.

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SOLO shares were trading at $6.44 per share on Friday afternoon, down $0.41 (-5.99%). Year-to-date, SOLO has gained 199.53%, versus a 15.44% rise in the benchmark S&P 500 index during the same period.



About the Author: Imon Ghosh

Imon is an investment analyst and journalist with an enthusiasm for financial research and writing. She began her career at Kantar IMRB, a leading market research and consumer consulting organization.

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