Despite heavy demand, supply chain issues might mar the electric vehicle (EV) industry’s performance in the near term. Moreover, affordability remains a significant factor limiting adoption. Given the near-term uncertainties, fundamentally weak EV stocks NIO (NIO), Rivian Automotive (RIVN), and Mullen Automotive (MULN), which are going downhill, might be best avoided. Keep reading.
Electric vehicle (EV) demand is expected to expand manifold in the coming years. According to a new report by BloombergNEF, annual spending on passenger EVs hit $388 billion in 2022, up 53% year-over-year. Moreover, the total value of EVs sold to date in the passenger vehicle segment has now crossed $1 trillion.
However, logistic hindrances remain a matter of concern for EV production. Global geopolitical conflicts, insufficient EV charging infrastructure, and scarcity of critical raw materials such as lithium, cobalt, and nickel could hamper the optimal productivity of the EV industry.
According to J.D. Power’s Electric Vehicle Experience Public Charging Study, the number of failed charging attempts rose from 15% in the first quarter of 2021 to more than 21% by the third quarter of 2022.
Furthermore, affordability remains a barrier to adoption. According to a study, only 8% of Americans actively consider an EV as their subsequent daily transport.
Given the backdrop, fundamentally weak EV stocks NIO Inc. (NIO), Rivian Automotive, Inc. (RIVN), and Mullen Automotive, Inc. (MULN), which have been declining in price, might be best avoided now.
NIO Inc. (NIO)
Headquartered in Shanghai, China, NIO designs, develops, manufactures, and sells intelligent electric vehicles in China. It offers five, six, and seven-seater electric SUVs and smart electric sedans.
NIO’s forward EV/Sales of 2.00x is 62% higher than the industry average of 1.24x. Its forward Price/Sales of 2.27x is 137.3% higher than the industry average of 0.96x.
NIO’s trailing-12-month gross profit margin of 14.43% is 59.2% lower than the industry average of 35.33%. Its trailing-12-month negative net income margin of 25.27% is lower than the industry average of 4.81%.
NIO’s loss from operations came in at $544.08 million for the quarter that ended September 30, 2022, up 290.2% year-over-year. Its comprehensive loss increased 30.9% year-over-year to $522.44 million.
NIO’s EPS is expected to decline 26% year-over-year to negative $0.27 for the yet-to-be-reported quarter ending December 2022. Over the past year, the stock has lost 56.8% to close the last trading session at $10.03.
NIO’s POWR Ratings reflect its poor prospects. It has an overall grade of F, which indicates a Strong Sell. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
Also, the stock has a D grade for Growth, Stability, Sentiment, and Quality. NIO is ranked #51 out of 61 stocks in the Auto & Vehicle Manufacturers industry. Click here to access the additional POWR Ratings for NIO (Value and Momentum).
Rivian Automotive, Inc. (RIVN)
RIVN designs, develops, manufactures, and sells electric vehicles and accessories. The company offers five-passenger pickup trucks and sports utility vehicles.
RIVN’s forward EV/Sales of 4.13x is 234.2% higher than the industry average of 1.24x. Its forward Price/Sales of 10.82x is substantially higher than the industry average of 0.96x.
Its trailing-12-month negative ROCE and ROTC of 127.71% and 38.22% are lower than the industry averages of 12.47% and 6.37%.
RIVN’s loss from operations came in at $1.77 billion for the quarter that ended September 30, 2022, up 128.6% year-over-year. Its net loss increased 39.8% year-over-year to $1.72 billion. Moreover, its cash and cash equivalents came in at $13.27 billion for the period ended September 30, 2022, compared to $18.13 billion for the period ended December 31, 2021.
Street expects RIVN’s EPS to fall 31.7% per annum for the next five years. Its EPS is expected to remain negative in 2023. Over the past year, the stock has lost 71.3% to close the last trading session at $19.08.
RIVN’s POWR Ratings are consistent with this bleak outlook. The stock has an overall F rating, equating to a Strong Sell in our proprietary rating system. In addition, the stock has an F grade for Value, Stability, and Quality. It is ranked #52 in the same industry.
We also have graded RIVN for Growth, Momentum, and Sentiment. Get all of RIVN’s ratings here.
Mullen Automotive, Inc. (MULN)
Electric vehicle company MULN manufactures and distributes electric vehicles. Its products include electric passenger and commercial vehicles, and it provides solid-state polymer battery technology.
MULN’s trailing-12-month negative ROTC and ROTA of 144.39% and 217.80% are lower than the industry averages of 6.37% and 4.34%.
MULN’s loss from operations came in at $73.62 million for the quarter that ended December 31, 2022, up 423.7% year-over-year. Its net loss increased 141.5% year-over-year to $376.91 million.
Over the past year, the stock has lost 59.4% to close the last trading session at $0.25.
MULN has an overall F rating, equating to a Strong Sell in our POWR Ratings system. It has an F grade for Value and Stability and a D for Sentiment and Quality. It is ranked #57 in the same industry.
To get the additional POWR Ratings for MULN for Growth and Momentum, click here.
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NIO shares were unchanged in premarket trading Wednesday. Year-to-date, NIO has gained 2.87%, versus a 4.36% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master’s degree in economics, she helps investors make informed investment decisions through her insightful commentaries.
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