Even After Their Recent Sell-Off, Stay Away From These 3 Overvalued Electric Vehicle Stocks

2021 marked a great run for the stock market, with the benchmark S&P 500 index returning almost 27%, while the Dow Jones Industrial Average and the Nasdaq Composite returned 18.7% and 21.4%, respectively. Prices of numerous stocks also soared to a record high last year. However, many companies are trading at very rich valuations solely due to bullish investor sentiment and are not backed by their fundamentals.

Investors’ interest in electric vehicle stocks has been growing due to growing climate change concerns and favorable government policies. According to a Research and Markets report, EVs are expected to represent 48% of all new cars sold in 2030. However, several start-ups are leveraging the optimistic market sentiment to boost their stock prices instead of focusing on its fundamentals and growth prospects. Several EV stocks surged in double digits last year, despite not launching any vehicles.

Given this backdrop, it could be wise to avoid electric vehicle stocks Rivian Automotive, Inc. (RIVN), Lucid Group, Inc. (LCID), and NIO Inc. (NIO) as they look overvalued at the current price levels, despite the ongoing market correction.

Rivian Automotive, Inc. (RIVN)

Recently listed RIVN designs and manufactures EVs, accessories, and services. The company has begun the delivery of its first-generation consumer vehicle, R1T. It also provides advanced technologies like advanced driver assistance systems (ADAS), Driver+ to enhance the driving experience of its customers.

On November 19, 2021, RIVN announced that it would not co-develop an EV in collaboration with its major shareholder, Ford Motor Company (F). This is a significant setback for RIVN as it largely relies on F and Amazon.com, Inc. (AMZN) as its customers.

RIVN’s net loss for the fiscal third quarter ended September 30, 2021, increased 328.1% year-over-year to $1.23 billion. The company’s adjusted EBITDA loss came in at $727 million, representing an increase of 158.7% year-over-year. Also, its operating expenses increased 141% year-over-year to $694 million.

In terms of forward EV/S and P/S, RIVN’s 1,255.01x and 1,159.51x are higher than the industry averages of 1.36x and 1.18x, respectively. Moreover, its forward P/B of 3.46x is 5.5% higher than the industry average of 3.28x. Analysts expect RIVN’s EPS to remain negative for this year and next year. Over the past month, the stock has lost 31.7% to close Friday’s trading session at $79.95.

RIVN’s POWR Ratings reflect its poor prospects. According to our proprietary rating system, it has an overall rating of D, which equates to a Sell. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

It has a D grade for Value, Stability, and Sentiment. It is ranked #44 out of 68 stocks in the F-rated Auto & Vehicle Manufacturers industry. Click here to see the other ratings of RIVN for Growth, Momentum, and Quality.

Lucid Group, Inc. (LCID)

LCID designs, engineers, and builds EVs, electric powertrains, and battery systems. As of June 30, 2021, the company had eight retail studios in the U.S. Its offerings include Air Dream Edition, Air Grand Touring, Air Touring, and Air Pure.

For the fiscal third quarter ended September 30, 2021, LCID’s revenue decreased 30.5% year-over-year to $0.23 million. The company’s adjusted EBITDA fell 55.1% year-over-year to $224.96 million, while its operating expenses came in at $493.96 million, up 205.2% year-over-year.

In terms of forward EV/S and P/S, LCID’s 912.11x and 976.46x are higher than the industry averages of 1.36x and 1.18x, respectively. Moreover, its forward P/B of 15.52x is 373.4% higher than the industry average of 3.28x. Analysts expect LCID’s EPS to remain negative this year and next year. The stock closed Friday’s trading session at $42.22.

LCID’s weak fundamentals are reflected in its POWR Ratings. According to our rating system, it has an overall F rating, which translates to Strong Sell. It has an F grade for Value, Stability, and Quality and a D grade for Sentiment. It is ranked #60 in the same industry. To see the other ratings of LCID (Growth and Momentum), click here.

NIO Inc. (NIO)

Based in Shanghai, China, NIO designs, develops and sells electric vehicles. The company offers five, six, and seven-seater electric SUVs and smart electric sedans. It also provides energy and service packages to its users; marketing, design, and technology development activities; manufacturing e-powertrains, battery packs, and components; and sales and after-sales management activities.

NIO’s adjusted loss from operations increased 41.9% sequentially to RMB726.30 million ($114.23 million). The company’s non-GAAP net loss increased 69.7% sequentially to RMB569.70 million ($89.60 million). Also, its non-GAAP loss per share came in at RMB0.36, representing an increase of 71.4% sequentially.

In terms of forward EV/S and P/S, NIO’s 8.15x and 8.72x are higher than the industry averages of 1.36x and 1.18x, respectively. Moreover, its forward P/B of 12.02x is 266.7% higher than the industry average of 3.28x. Analysts expect NIO’s EPS to remain negative this year and next year. The stock has missed Street EPS estimates in three of the trailing four quarters. Over the past six months, the stock has lost 28.1% to close Friday’s trading session at $30.95.

NIO’s POWR Ratings reflect this weak outlook. The stock has an overall rating of D, which equates to a Sell in our proprietary rating system. It has an F grade for Stability and a D grade for Value and Quality. Again, in the same industry, it is ranked #54. Click here to see the additional ratings of NIO for Growth, Momentum, and Stability.

Article 24:

Author: Riddhima Chakraborty

Date: 01/18/2022

3 Buy-Rated Stocks Yielding More than 4%

Primary Ticker: AbbVie Inc.(NYSE:ABBV)

Secondary Ticker: PM, VGR

Teaser: As the stock market is expected to remain volatile owing to the anticipated interest rate hikes to control inflation, it could be wise to bet on fundamentally strong dividend-yielding stocks AbbVie (ABBV), Philip Morris (PM), and Vector Group (VGR) for securing a steady income stream. These stocks are rated ‘Buy’ in our proprietary rating system.

Investors’ concerns over the looming interest rate hike are influencing the performance of the benchmark stock indexes. As high inflation is projected to persist for an extended period, the central bank will likely aggressively raise the benchmark interest rates this year.

Therefore, investors looking to dodge the market volatility could invest in dividend-yielding stocks to ensure a steady income stream. Wharton finance professor Jeremy Siegel believes that the investor sentiment will be stable enough while foreseeing the S&P 500 rising 9% in 2022. Emphasizing dividend stocks, he stated, “dividend stocks are protected against inflation because firms have been able to raise their prices, their cashflows, and increase their dividends.”

Given this backdrop, quality dividend-yielding stocks AbbVie Inc. (ABBV), Philip Morris International Inc. (PM), and Vector Group Ltd. (VGR) could be solid picks now. These stocks are rated ‘Buy’ in our proprietary POWR Ratings system.

AbbVie Inc. (ABBV)

ABBV discovers, develops, manufactures, and sells pharmaceuticals worldwide. The company’s key therapeutic areas include immunology, oncology, neuroscience, eye care, virology, women's health, and gastroenterology.

On October 29, 2021, Richard A. Gonzalez, chairman and CEO, ABBV, said, "Based upon our strong momentum, we are increasing our full-year 2021 EPS guidance. We remain highly confident in AbbVie's long-term outlook and are once again raising our dividend, which has grown over 250 percent since inception."

Over the last five years, ABBV’s dividend payout has grown at a 17.71% CAGR. While the four-year average dividend yield for ABBV is 4.52%, its current dividend translates to a 4.15% yield. ABBV recently announced an increase in the company's quarterly cash dividend from $1.30 per share to $1.41 per share, payable on February 15, 2022.

ABBV’s net revenues came in at $14.34 billion for the third quarter ended September 30, 2021, up 11.2% year-over-year. Its net earnings increased 37.5% year-over-year to $3.18 billion, and its adjusted EPS came in at $3.33, up 17.7% year-over-year.

Analysts expect ABBV’s revenue to increase 22.8% year-over-year to $56.22 billion in fiscal 2021. Its EPS is expected to grow at 20% to $12.67 in fiscal 2021. In addition, it surpassed Street EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 21.7% to close Friday’s trading session at $135.87.

ABBV’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which indicates a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

ABBV has a B grade for Growth, Value, and Quality. Within the Medical - Pharmaceuticals industry, it is ranked #11 out of 190 stocks. Click here to see the additional POWR Rating for Momentum, Stability, and Sentiment for ABBV.

Philip Morris International Inc. (PM)

PM manufactures and sells cigarettes, other nicotine-containing products, smoke-free products, and related electronic devices and accessories. It markets and sells its products in the European Union, Eastern Europe, the Middle East, Africa, South and Southeast Asia, East Asia, Australia, Latin America, and Canada. 

On October 19, 2021, Jacek Olczak, Chief Executive Officer, said, “We confirm our confidence in our 2021 to 2023 growth targets, despite device constraints that could persist into the first half of 2022, with temporarily lower IQOS user growth rates.”

PM has increased its annual dividend every year since becoming a public company in 2008. Over the last three years, PM’s dividend payout has grown at a 2.96% CAGR. Its current dividend translates to a 4.84% yield. Also, its four-year average yield is 5.48%. On December 9, 2021, PM declared a regular quarterly dividend of $1.25 per common share, payable on January 10, 2022.

For the fiscal third quarter ended September 30, 2021, PM’s net revenues came in at $8.12 billion, up 9.1% year-over-year. Its net earnings increased 6.2% year-over-year to $2.59 billion. In addition, its EPS came in at $1.55, up 4.7% year-over-year.

PM’s revenue is expected to come in at $31.24 billion in fiscal 2021, representing an 8.9% year-over-year rise. The company’s EPS is expected to increase 17% year-over-year to $6.05 in fiscal 2021. In addition, it surpassed Street EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 27.4% to close Friday’s trading session at $103.38.

It’s no surprise that PM has an overall B rating, which equates to a Buy in our proprietary rating system. In addition, it has an A grade for Quality and a B grade for Stability.

PM is ranked #4 out of 11 stocks in the B-Rated Tobacco industry. Click here to see the additional POWR Ratings for PM (Growth, Value, Momentum, and Sentiment).

Vector Group Ltd. (VGR)

VGR, through its subsidiaries, manufactures and sells cigarettes in the United States. It operates in two segments, Tobacco and Real Estate. It is a constituent of the S&P SmallCap 600 Index and the Russell 2000 Index.

On November 8, 2021, Howard M. Lorber, President and CEO, VGR, said, “We are excited by the continued strong performance of our tobacco business which validates our market strategy and reflects the competitive advantages we have in the deep discount segment.”

VGR’s four-year average dividend yield is 6.55%, while its current dividend translates to a 4.42% yield. On November 30, 2021, VGR declared a regular quarterly cash dividend of $0.20 per share on its common stock.

VGR’s total revenues increased 19.1% year-over-year to $652.65 million for the fiscal third quarter ended September 30, 2021. The company’s net income came in at $48.77 million, up 27.9% year-over-year, and its EPS came in at $0.32, up 28% year-over-year.

For fiscal 2021, analysts expect VGR’s revenue to be $2.53 billion, representing a 26.6% year-over-year rise. In addition, the company’s EPS is expected to increase 94.5% year-over-year to $1.77 in fiscal 2021. Also, it surpassed the consensus EPS estimates in three of the trailing four quarters. The stock closed Friday’s trading session at $11.70.

VGR’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to a Buy in our POWR Rating system. Also, the stock has a B grade for Growth, Value, and Quality.

Click here to see VGR’s rating for Momentum, Stability, and Sentiment as well. VGR is ranked #1 of 11 stocks in the Tobacco industry.

RIVN shares were trading at $73.15 per share on Tuesday afternoon, down $6.80 (-8.51%). Year-to-date, RIVN has declined -29.45%, versus a -3.90% rise in the benchmark S&P 500 index during the same period.

Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.

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