2 Electric Vehicle Companies to Avoid in July

Despite macroeconomic headwinds, demand for electric vehicles (EVs) remains strong. According to Fortune Business Insights, the U.S. EV market is expected to grow at a CAGR of 25.4% from 2021 to 2028. However, the industry’s growth is constrained by supply chain issues and inadequate infrastructure for charging.

On the other hand, rising recession fears are leading to declining consumer confidence. The Conference Board Consumer Confidence Index went down 4.5 points in June from 103.2 in May and is currently at its lowest since February 2021. This could eventually lead to shrinking aggregate demand. Moreover, investors are looking for fundamentally solid low-risk stocks which can help weather an economic slowdown.

Therefore, fundamentally weak EV stocks Rivian Automotive, Inc. (RIVN) and Lucid Group, Inc. (LCID) could be best avoided now. These stocks are rated Strong Sell in our POWR Ratings system.

Rivian Automotive, Inc. (RIVN)

RIVN designs, develops, manufactures, and sells EVs and accessories. The company offers five-passenger pickup trucks and sports utility vehicles. It provides Rivian Commercial Vehicle platform for electric Delivery Van with collaboration with Amazon.com. 

RIVN’s loss from operations came in at $1.58 billion for the first quarter that ended March 31, 2022, up 285.1% year-over-year. Its net loss increased 284.8% year-over-year to $1.59 billion. Moreover, its total operating expenses were $1.08 billion, up 162.7% year-over-year.

RIVN’s EPS is expected to remain negative in 2022 and 2023. Also, its EPS is estimated to decrease 31.7% per annum for the next five years. The stock has lost 71.4% year-to-date to close the last trading session at $29.66.

RIVN’s POWR Ratings reflect its poor prospects. The stock has an overall F grade, equating to a Strong Sell in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

RIVN has an F grade for Value, Stability, and Quality and a D grade for Growth and Sentiment. Click here to access the additional POWR Ratings for RIVN (Momentum). RIVN is ranked #65 out of 66 stocks in the F-rated Auto & Vehicle Manufacturers industry.

Lucid Group, Inc. (LCID)

Technology and automotive company LCID develops EV technologies. The company designs, engineers, and builds electric vehicles, EV powertrains, and battery systems. It operates twenty retail studios in the United States.

On June 24, 2022, LCID announced the opening of its first retail location in the Pacific Northwest at University Village in Seattle, WA. However, given its inconsistent financials, LCID might not immediately reap significant profits from its business expansion policies.

LCID’s revenue increased 18,326.5% year-over-year to $57.67 million for the first quarter that ended March 31, 2022. However, its loss from operations increased 100% year-over-year to $597.53 million. Its negative adjusted EBITDA came in at $383.78 million, compared to a negative $189.09 million in the year-ago period.

Analysts expect LCID’s EPS to remain negative in 2022 and 2023. Its EPS is expected to decline at 69.4% per annum for the next five years. The stock has lost 52.1% year-to-date to close the last trading session at $18.22.

LCID has an overall F rating, equating to a Strong Sell in our POWR Ratings system. It has an F grade for Value, Stability, and Quality.

We’ve also rated it for Growth, Momentum, and Sentiment. Click here to access all the LCID ratings. It is ranked #51 out of 66 stocks in the Auto & Vehicle Manufacturers industry.

RIVN shares were trading at $30.48 per share on Thursday morning, up $0.82 (+2.76%). Year-to-date, RIVN has declined -70.60%, versus a -17.85% rise in the benchmark S&P 500 index during the same period.

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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