As governments globally endorse and incentivise the adoption of electric vehicles, there is some big money to be made in the industry.
Therefore, it’s not surprising that dozens of new companies have emerged globally with focus on EVs. Further, established traditional automakers are making big investments to accelerate the portfolio shift towards electric vehicles. So, as competition intensifies, investors need to remain cautious. Not all EV companies will survive and flourish. EV stocks to sell represent companies that are likely to be laggards in the race.
Coming back to intense competition, in 2022, there were 500 available EV options globally. The number of models has continued to increase with vehicle design and technology being differentiating factors. Clearly, end users are flooded with choices. Some emerging players might continue to face cash burn as growth expectations become subdued.
Let’s talk about three EV stocks to sell as they look fundamentally weak amidst intense competition.
Lucid Group (LCID)
Lucid Group (NASDAQ:LCID) stock has already destroyed significant investor wealth. In the last six months, LCID has plunged by 62%. While the short interest in the stock remains high at 26%, don’t expect a short-squeeze rally.
Lucid Group is a classic case of a story that got listed during market euphoria and has some ambitious growth targets. However, the company has failed to meet its guidance, and growth is likely to remain depressed.
At the same time, Lucid Group continues to burn significant cash. For the first nine months of 2023, Lucid reported cash used in operations of $2 billion. As of Q3 2023, the company had $4.5 billion in cash buffer. Expect further equity dilution. Considering the plunge in LCID stock, the dilution will be significant.
The company expects to launch Lucid Gravity by the end of this year. However, that’s not a big enough catalyst to drive the stock higher. The markets will continue to focus on deliveries growth and cash burn.
ChargePoint Holdings (CHPT)
Among EV charging stocks, ChargePoint Holdings (NYSE:CHPT) looks fundamentally weak. CHPT stock has plunged by 83% in the last 12 months. I don’t see hopes of any reversal in trend. With better options available in the EV charging industry, CHPT is among the top EV stocks to sell.
It’s worth noting that emerging EV charging companies have been reporting healthy revenue growth. Of course, cash burn has sustained for most companies. For Q3 2023, ChargePoint reported a 12% decline in revenue on a year-on-year (YOY) basis to $110 million. Further, operating loss widened to $154 million.
ChargePoint ended the quarter with cash and equivalents of $397.4 million. However, if growth remains depressed, there will be additional need for equity infusion. With intense industry competition, ChargePoint might be headed towards difficult times.
The company has guided to achieve positive non-GAAP by Q4 2024. However, that has not impressed the markets. Therefore, steer clear of the stock even after the big correction.
Mullen Automotive (MULN)
Mullen Automotive (NASDAQ:MULN) has resumed the downtrend after the reverse-split to meet the listing compliance. For the first three weeks of the year, MULN stock has plummeted by 46%. This comes after a massive correction in the last 12 months. It’s relatively clear that Mullen will not survive 2024.
Notably, Mullen has started generating revenue in the last financial year. However, a massive scale-up is unlikely and significant cash burn will sustain. Infusion of equity will translate into massive dilution. And I doubt if investors are willing to finance this sinking ship.
Mullen CEO has already indicated in December 2023 that the company “needs to raise capital in 2024 to fund initiatives until such time as it is cash flow positive.” Most importantly, there isn’t clarity on the time-line for achieving cash flow break-even. With better options available, I would avoid this EV stock even from a speculation perspective.
On the date of publication, Faisal Humayun did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
