Growing investor excitement about the automotive sector going electric was reflected in electric vehicle (EV) stocks’ impressive rally in 2020. Improved automotive performance, government subsidies, and cost-efficiencies have been motivating consumers to switch to EVs. As a result, the booming EV space has been birthing many new companies, arguably overcrowding the industry…
But not all the players in this booming market possess sound fundamentals. In fact, many EV players have been witnessing corrections this year due to investor concern over the industry’s overvaluation, and production delays due to a global semiconductor shortage. Investors’ bearish outlooks are often manifested in their short-selling activity as they bet against stocks that they believe have become overvalued relative to the fundamentals and are due for a pullback. Short percentage of float is one of the commonly used metrics for understanding how aggressive a stock’s short sellers have been. Thanks to the actions of Reddit’s WallStreetBets forum, many investors have lately been introduced to the short squeeze. Experts believe that this bullish market may keep the trend going and many highly shorted stocks could get caught up in this short squeeze frenzy.
Nikola Corp. (NKLA – Get Rating), Blink Charging Co. (BLNK – Get Rating), and Workhorse Group, Inc. (WKHS – Get Rating) are three EV players in the EV market that have been aggressively shorted by investors. Their weak fundamentals and other recent developments are raising red flags and, hence, we think it could be wise to avoid these stocks now.
Click here to checkout our Electric Vehicle Industry Report for 2021
Nikola Corp. (NKLA – Get Rating)
NKLA is an integrated zero-emissions transportation systems provider. It designs and manufactures battery-electric and hydrogen-electric vehicles, drivetrains, energy storage systems, and hydrogen fueling station infrastructure. NKLA has been all over the news since last year because investors have accused the company of being “an intricate fraud built on lies” based on alleged false statements by its founder, Trevor Milton.
Milton stepped down following a scathing report by short-selling firm Hindenburg Research that accused him of fraud, and the company later admitted to faking a video of its prototype electric hydrogen truck driving last September. . In fact, NKLA has been facing several controversies post the Hindenburg report. On March 27, Kahn Swick & Foti, LLC (KSF) began an investigation in response to allegations that the company had failed to disclose material information and violated federal securities laws. Furthermore, the company’s head of fuel cell development stepped down at the beginning of this month, and the company’s executive vice president of technology, hydrogen, and fuel cells left the company on April 1. These moves have weighed heavily on the stock.
NKLA is a pre-revenue company that has not yet produced any products and doesn’t even possess a manufacturing plant. The company is scheduled to release today its financial results for the first quarter, ended March 31, 2021. Its loss from operations has increased 425.7% year-over-year to $146.84 million in the fourth quarter. Its net loss has increased 459.7% from its year-ago value to $147.10 million. The company plans to begin trial production by the third quarter of 2021 in the Coolidge manufacturing facility in Arizona and anticipates starting the production of its Nikola Tre in the fourth quarter of 2021. Wall Street analysts expect NKLA’s current year EPS to decline 80.6% year-over-year.
NKLA signed a letter of intent with port trucking firm Total Transportation Services Inc yesterday. It involves trials for and a possible order of 100 vehicles from the electric-truck maker. NKLA also joined hands with TravelCenters of America last month to develop a network of hydrogen fueling stations for heavy-duty trucks that will span the United States. However, these alliances are being viewed with skepticism after its General Motor (GM) deal turned sour last November, and NKLA discontinued collaboration on refuse truck development with Republic Services, Inc. (RSG) in December 2020.
NKLA became public in June 2020 and surged as much as 505% to hit its $93.99 all-time high on September 6, 2020. However, NKLA’s stock is down 23.1% since its debut and has retreated 89.2% from its high. The stock closed yesterday’s trading session at $10.41, falling 57% over the past three months. In terms of forward EV/Sales, NKLA is currently trading at 181.80x, 8,903.5% more expensive than the 2.02x industry average. 35.78% of NKLA’s float shares have been sold short.
NKLA’s POWR Ratings are consistent with this bleak outlook. The stock has an overall F rating, which equates to Strong Sell in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.
NKLA has an F grade for Value, Stability and Quality. It is currently ranked #49 in the 53-stock Auto & Vehicle Manufacturers industry.
In total, we rate NKLA on eight different levels. Beyond what we stated above, we have also given NKLA grades for Momentum, Sentiment and Growth. Get all NKLA’s ratings here.
Click here to check out our Automotive Industry Report for 2021
Blink Charging Co. (BLNK – Get Rating)
BLNK owns, operates, and provides EV charging equipment and networked EV charging services. It also provides Blink Network, a cloud-based system that operates, maintains, and tracks various charging stations and associated charging data, and enables the remote monitoring and management of stations and payment processing. BLNK offers more than 23,000 EV charging stations in the United States and worldwide.
BLNK inked an agreement with GM to make public charging more convenient for GM vehicle owners. As part of GM’s Ultium Charge 360, EV customers will soon be offered seamless access to publicly available BLNK EV charging sites across the United States. Also, BLNK entered a…
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