Last year was tough for the automotive industry. However, increasing fuel prices and government incentives to encourage the transition from traditional, internal combustion vehicles to electric vehicles (EV) have boosted EV sales this year. To meet the rising demand, automakers are increasingly investing in this space. And the global electric vehicle market is expected to reach $812.89 billion by 2028, registering a 19,8% CAGR.
While most EV players have benefited from the industry tailwinds, some are struggling to stay afloat due to intense competition. Furthermore, an acute semiconductor chip shortage and supply chain constraints are hampering the production of EVs.
Given this backdrop, we think it could be wise to avoid EV stocks that possess weak fundamentals and poor growth prospects. Cases in point are Hyliion Holdings Corp. (HYLN) and Lordstown Motors Corp. (RIDE), which due to their fragile financial health have recently been downgraded by analysts. Therefore, we think these two stocks are best avoided now.
Click here to checkout our Electric Vehicle Industry Report for 2021
Hyliion Holdings Corp. (HYLN)
HYLN designs and develops hybrid and electrified powertrain solutions for the commercial transportation industry. The Cedar Park, Tex.-based company’s solutions utilize its battery systems, control software, and data analytics with fully integrated electric motors and power electronics to produce electrified powertrain systems. UBS analysts have downgraded HYLN from “neutral” to “sell” and lowered the target price from $14 to $5.
HYLN’s operating loss increased 583.8% year-over-year to $23.44 million in the second quarter, ended June 30, 2021. The company’s net loss grew 481% from its year-ago value to $23.24 million. Its loss per share rose 160% from the prior-year quarter to $0.13. In addition, the company’s cash and cash equivalents declined 18.5% for the six months ended June 30, 2021, to $317.71 million.
HYLN’s EPS is expected to decrease 178.6% in the current year. The stock has lost 54.6% in price over the past nine months and 73.6% over the past year.
HYLN’s POWR Ratings are consistent with this bleak outlook. HYLN has an overall F rating, which equates to a Strong Sell in our POWR Rating system. Also, the stock has an F grade for Value and Growth.
Click here to see the additional POWR Ratings for HYLN (Momentum, Sentiment, Stability, and Quality). The stock is ranked last of 22 stocks in the A-rated Trucking Freight industry.
Lordstown Motors Corp. (RIDE)
RIDE is an automotive company that designs and manufactures Endurance, an electric pickup truck for fleet customers. The Lordstown, Ohio, company is an original equipment manufacturer (OEM), and its In-Wheel Drive System utilizes four hub motors with integrated software. RIDE has been downgraded from “hold” to “sell” by a Morgan Stanley analyst.
During the second quarter, ended June 30, 2021, RIDE’s total operating expenses increased 1,009.9% year-over-year to $110.34 million. The company’s net loss grew 1,259.6% from its year-ago value to $108.2 million. Its loss per share rose 454.5% from the prior-year quarter to $0.61. Also, the company’s cash and cash equivalents declined 41.9% for the six months ended June 30, 2021, to $365.9 million.
The company failed to surpass the consensus EPS estimates in each of the trailing four quarters. RIDE’s EPS is expected to decline by 123.1% in the current year. The stock has declined 79.3% in price over the past nine months.
RIDE’s poor prospects are reflected in its POWR Ratings. The stock has an overall F rating, which equates to Strong Sell in our proprietary rating system.
The stock has an F grade for Value, Growth, and Stability. We’ve also graded RIDE for Quality, Momentum, and Sentiment. Click here to access all of RIDE’s ratings. RIDE is ranked #61 of 63 stocks in the D-rated Auto & Vehicle Manufacturers industry.
Click here to check out our Automotive Industry Report for 2021
HYLN shares rose $0.09 (+1.19%) in premarket trading Tuesday. Year-to-date, HYLN has declined -53.46%, versus a 21.23% rise in the benchmark S&P 500 index during the same period.
About the Author: Priyanka Mandal
Priyanka is a passionate investment analyst and financial journalist. After earning a master's degree in economics, her interest in financial markets motivated her to begin her career in investment research.
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