Rising consumer interest in electric vehicles (EV) due to their cost-efficiency and government incentives led the EV industry into a bubble last year, with many small- and large-cap participants becoming overvalued. Surging oil and natural gas prices because of the Russia-Ukraine war, support from President Biden’s $5 billion EV plan, and U.S. EV tax credits should boost the EV industry’s growth further. Moreover, EV manufacturers’ efforts to develop innovative fleet designs and improved battery technology should bode well for the industry. The global EV market is expected to grow at a 15.4% CAGR to $187.94 billion by 2026.
Despite the global chip shortage and input price inflation, which are keeping EV makers under pressure, EV sales rose significantly in February 2022. Efforts made to ease these supply chain issues and increased focus on domestic production should help EV makers overcome the challenges in the coming months. Investors’ interest in this space is evident from the Global X Autonomous & Electric Vehicles ETF’s (DRIV) 7.7% returns over the past month.
However, all EV companies are not well-positioned to perform well in the near-term. Fundamentally weak EV stocks Cenntro Electric Group Limited (CENN), Tesla, Inc. (TSLA), and Nikola Corporation (NKLA) look overvalued at their current price levels. So, these stocks could be best avoided now.
Click here to checkout our Electric Vehicle Industry Report for 2022
Cenntro Electric Group Limited (CENN)
With a market capitalization of $514.67 million, CENN is a commercial EV technology company that designs and manufactures electric light- and medium-duty commercial vehicles (ECVs) and serves a variety of corporate and governmental organizations in support of city services, last-mile delivery, and other commercial applications. The company has also designed and developed an in-house telematics box, which allows its ECVs to send and receive data relating to location, speed, acceleration, braking, and battery consumption, among others, to end-users.
On March 25, 2022, CENN completed the previously-announced acquisition of a 65% equity interest in Tropos Motors Europe GmbH (TME), a wholly-owned subsidiary of a Germany-based automotive logistics services provider Mosolf SE & Co. KG, for €3.25 million and the assumption of 100% of a shareholder loan from Mosolf to TME in the amount of €11.9 million. TME will change its name to Cenntro Automotive Europe GmbH, and its assembly facility in Herne, Germany, will be used to assemble the full line of CENN’s vehicles for the European market. This acquisition adds significant capacity to its production and fast-track its market expansion and brand recognition within EMEA.
CENN has lost 50.5% over the past three months and ended yesterday’s trading session at $1.97.
CENN’s POWR Ratings reflect this bleak outlook. The stock has an overall D rating, which equates to a Sell in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
CENN has an F grade for Value and Stability and a D grade for Quality. Click here to see the additional ratings for CENN’s Sentiment, Momentum, and Growth.
Among the 68 stocks in the F-rated Auto & Vehicle Manufacturers industry, CENN is ranked #45.
Tesla, Inc. (TSLA)
As the United States’ largest EV maker, TSLA designs, develops, manufactures, leases, and sells high-performance EVs and electric powertrain components. The company also offers services related to its sustainable energy products internationally. The company operates in two segments—Automotive and Energy Generation and Storage. It develops energy storage products, commercial facilities, and utility sites and owns its sales and service network. It has $1.09 trillion in market capitalization.
In the 2022 first quarter, TSLA produced more than 305,407 vehicles and delivered more than 310,048 vehicles. TSLA produced 14,218 Model S/X vehicles in the 2022 first quarter, compared to 13,109 vehicles in the 2021 fourth quarter. And 305,407 Model 3/Y vehicles were produced in the 2022 first quarter, versus 292,731 vehicles in the 2021 fourth quarter. As of December 31, 2021, TSLA had $17.58 billion in cash and cash equivalents, down 9.3% from the end of fiscal 2020.
The stock’s 12.93x forward EV/Sales is 1057% higher than the 1.12x industry average. In terms of forward Price/Sales, TSLA is currently trading at 13.16x, 1356.7% higher than the industry average of 0.90x. Over the past three months, it has gained 3% and ended yesterday’s trading session at $1,057.26.
TSLA’s weak fundamentals are reflected in its POWR Ratings. The stock has an overall C rating, which equates to Neutral in our proprietary rating system.
TSLA has a D grade for Value and Stability and a C grade for Momentum. Click here to see additional ratings for TSLA’s Growth, Quality, and Sentiment.
TSLA is ranked #29 of 68 stocks in the same industry.
Nikola Corporation (NKLA)
With a market capitalization of $3.64 billion, NKLA operates as a zero-emissions transportation and infrastructure solution provider. The company designs and manufactures battery-electric and hydrogen-EVs, EV drivetrains, vehicle components, energy storage systems, and hydrogen fueling station infrastructure.
On March 29, 2022, NKLA and ENGS Commercial Finance Co., a member of Mitsubishi HC Capital Group and a market-leading commercial finance company, signed an agreement to facilitate sales of Class 8 Nikola Tre battery-electric vehicles (BEVs) and Nikola Tre hydrogen fuel-cell electric vehicles (FCEVs). Working directly through the Nikola dealer network, ENGS will offer customer finance solutions to purchase Nikola vehicles, charging assets, and infrastructure requirements to offer a broad range of financial solutions to Nikola customers. This will help NKLA and their dealer network to provide the best customer finance products in the market to help promote the sale of Nikola trucks.
For its fiscal year 2021 fourth quarter ended December 31, 2021, NKLA’s loss from operations came in at $162.71 million, up 10.8% from the prior-year period. While its non-GAAP net loss increased 39.6% year-over-year to $93.43 million, its non-GAAP EPS rose 35.3% to $0.23. The company had $497.24 million in cash and cash equivalents as of December 31, 2021, down 40.9% from the end of fiscal 2020.
Analysts expect the company’s EPS to remain negative for fiscal 2022, ending December 31, 2022. NKLA’s 31.92x forward EV/Sales is 1821.5% higher than the 1.66x industry average. In terms of forward Price/Sales, NKLA is currently trading at 34.76x, which is 2569.7% higher than the industry average of 1.30x. The stock has lost 16.4% over the past three months and ended yesterday’s trading session at $8.65.
NKLA’s weak fundamentals are reflected in its POWR Ratings. The stock has an overall C rating, which equates to a Neutral in our proprietary rating system.
NKLA has an F grade for Stability and a D grade for Sentiment, Value, and Quality. Click here to see the additional ratings for NKLA’s Momentum and Growth.
NKLA is ranked #61 in the Auto & Vehicle Manufacturers industry.
CENN shares were trading at $1.91 per share on Friday afternoon, down $0.06 (-3.05%). Year-to-date, CENN has declined -64.37%, versus a -5.47% rise in the benchmark S&P 500 index during the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market.
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