While not repeating the mantra that electric vehicles are the future can get you into trouble with the sector loyalists, we must at least agree that at least some enterprises deserve the title of worst EV stocks to sell. Fundamentally, while the underlying technology facilitates many opportunities, competition will likely be consolidated. It happened with combustion cars, it will probably happen again with EVs.
Moreover, you’ll notice that I’m not putting Tesla (NASDAQ:TSLA) on this list nor am I including legacy automakers that have transitioned to electrification such as General Motors (NYSE:GM). These companies enjoy the capital to survive a brewing war of attrition. Unfortunately, smaller upstarts simply lack capital. Like it or not, these rate as the EV stocks to avoid.
Granted, few people arguably like talking about selling troubled enterprises. However, that’s life – you’re going to win some, you’re going to lose some. With that, be wary of a possible EV stock crash in the startup arena.
|FFIE||Faraday Future Intelligent Electric||$0.16|
I don’t mean to beat a dead Workhorse (NASDAQ:WKHS). However, it’s extremely difficult to see any other scenario for WKHS stock besides zero. And please – I’m not saying that to be controversial for controversy’s sake. Just look at its chart. Just in this year alone (and we’re just getting into May), WKHS hemorrhaged nearly 42% of equity value. Good companies just don’t do that. Let’s be real.
In the trailing one-year period, WKHS tanked nearly 69%. Using data from Google Finance, Workhorse’s lifetime return is a loss of almost 91%. Whether in the immediate frame or zoomed out, I see nothing that says recovery is imminent or even possible.
Financially, Workhorse technically enjoys some stability in the balance sheet. For example, its cash-to-debt ratio is 9.81, better than 87.2% of companies in the vehicles and parts industry. Also, the company prints an “impressive” revenue growth rate but here’s the deal: we’re talking about a movement from a small number to a larger number that’s still small. With profit margins deep in negative territory, WKHS is one of the worst EV stocks to sell.
Faraday Future (FFIE)
At the risk of getting bombarded with the internet defense league of Faraday Future (NASDAQ:FFIE), I’ve got to be honest. This company looks like utter [expletive]. Since the start of the year, FFIE fell 37%, never a great way to invigorate confidence among retail investors. Then, should you decide to check out the past 365 days, you’ll discover that FFIE hemorrhaged over 93% of value.
Folks, we’re dealing with a security that trades hands for 17 cents. So, that means by protocol, InvestorPlace will have a warning for you about the dangers of penny stocks. If you want to dive into the granularity, the glaring problem here – as with other EV stocks to avoid – is revenue or lack thereof. With aspiration as fuel, we have an enterprise that suffers a return on equity (ROE) of 155.57% below zero.
Fundamentally, Faraday will attempt to sell its FF91 EV at a starting price of $180,000. Under this economy and under the ongoing sector price war, such a price represents a pure delusion. I’m sorry but this is one of the EV stocks to sell.
Lordstown Motors (RIDE)
Back in May 2021 – which feels like forever ago – I stated some unpleasant words about Lordstown Motors (NASDAQ:RIDE). Focused on electrifying commercial fleets, Lordstown from the get-go sought to distinguish itself from Tesla. Admittedly, that was a positive but it was the only positive apparently. With Lordstown bleeding cash and suffering from myriad teething problems (to put it mildly), I said stay away.
Not to toot my own horn but I’d say this piece aged like a bottle of Romanée-Conti. At the time of publication, RIDE closed at $9.70 a pop. Right now, it trades hands at 29 cents. We’re talking about a loss of more than 95%. My only regret regarding the piece is that I didn’t short the stock.
Financially, I’m just not seeing how Lordstown will dig itself out of the hole. Sure, you can look at its zero-debt balance sheet and applaud that accomplishment. However, it really needs to pick up the pace operationally. The $190,000 sales it posted in the fourth quarter of 2022 won’t cut it obviously. However, the recall of its Endurance electric truck doesn’t add confidence. Interestingly, analysts peg RIDE as a moderate sell. Let’s face it – it’s one of the EV stocks to avoid.
Electrameccanica Vehicles (SOLO)
Fundamentally, when Electrameccanica Vehicles (NASDAQ:SOLO) introduced its Solo EV, one could make the argument that the three-wheeled, one-person vehicle was the perfect commuter platform. Basically, people drive to work alone so the extra seats in a typical passenger go to waste. However, vehicles with such a narrow framework represent a difficult sell.
Moreover, CNBC pointed out another problem: the day of the $25,000 EV may soon be upon us. That means for a little bit more than a Solo, you can get a fully functional, four-wheel EV. Unfortunately, this competitive headwind would leave little room for Electrameccanica to thrive. Also, I’m afraid the recalls listed on its website don’t help.
Not surprisingly, the SOLO stock features poor fiscal stability. I’m going to give it credit for having a high cash-to-debt ratio relative to the underlying sector. But the company’s Altman Z-Score sits at 2.88 below zero, indicating distress and a significant risk of bankruptcy. Priced at only 51 cents after having lost 71% in the past year, I don’t have great feelings for SOLO. Regrettably, it’s one of the worst EV stocks to sell.
Another company that entered the electrification space with much promise, Arrival (NASDAQ:ARVL) garnered initial popularity for its electric van and bus. Naturally, both platforms offered tremendous potential for EV integration. Through electric-powered vans, fleet operators can save money by addressing the last-mile problem. On the other hand, a quiet, zero-emissions bus would do wonders for the urban sprawl.
Unfortunately, Arrival never gained traction since its initial burst higher in late 2020. Since the beginning of this year, ARVL hemorrhaged 76% of its equity value. Believe it or not, it gets worse. In the trailing one-year period, shares plunged nearly 98%. Just by the price action alone, I fail to see how Arrival recovers from here.
To be fair, the company does enjoy a cash-rich balance sheet relative to its sector. However, that’s about the only real positive data point. Like other aspirational EV stocks to sell, Arrival remains a pre-revenue enterprise. It incurs horrible losses, digging itself further into a fiscal hole. Sadly, you can make the argument that ARVL ranks among the overvalued EV stocks because circumstances seem so dire.
An admittedly intriguing idea on paper, Proterra (NASDAQ:PTRA) is an automotive and energy storage company based in Burlingame, California. According to its public profile, the company designs and manufactures battery electric transit buses, battery systems for other heavy-duty vehicle builders, and charging systems for fleets of heavy-duty vehicles. Despite seeming relevancies, PTRA ranks among the EV stocks to sell.
Generally, when publicly traded companies evaporate double-digit market value in a condensed time period, it points to severe challenges that may not be overcome. Since the January opener, PTRA imploded to the tune of nearly 69%. In the trailing one-year period, shares fell almost 82%.
To be fair, Proterra enjoys a cash-to-debt ratio of 2.02, which ranks better than nearly 74% of the competition. As well, it posts a three-year revenue growth rate of 12.4%. However, its profit margins sit deeply in negative territory. Also, the Altman Z-Score of 1.19 below zero reflects distress and a high probability of bankruptcy.
Nevertheless, analysts peg PTRA as a consensus moderate buy with a price target of $4.27 implying 265% upside potential. Sadly, the lack of financial substance means it’s one of the EV stocks to avoid.
Mullen Automotive (MULN)
While it might seem like everyone’s favorite short-squeeze opportunity, from a financial perspective, Mullen Automotive (NASDAQ:MULN) may be one of the worst EV stocks, if not the worst. At a share price of just under 8 cents, MULN hemorrhaged an astonishing 76% of market value since Jan. In the past 365 days, it gave up 94%.
Helping drive positive sentiment was an announcement that Mullen retained outside counsel to investigate possible market manipulation and illegal short selling. So, MULN’s erosion didn’t have anything to do with broken promises? Or that its financials continue to bleed while management makes even more promises?
Don’t get me wrong – it’s possible that market manipulation may have impacted MULN. Where I have a problem is that management doesn’t seem to be taking accountability for its own shortcomings. Some of these shortcomings are unnecessary errors, such as making promises about substantive press releases that never materialize.
Unlike some other pre-revenue EV manufacturers, its balance sheet doesn’t offer much confidence. Its cash-to-debt ratio of 0.66 is just slightly better than the sector median. However, given the capital-intensive nature of the automotive arena, Mullen needs more support – but that support might not be coming.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.