2 Electric Vehicle Stocks Recently Downgraded by Goldman Sachs

A semiconductor chip shortage and overvaluation concerns have been taking a toll on electric vehicle (EV) stocks of late. While the EV industry's long-term prospects look bright, many companies in the sector with weak fundamentals are expected to continue retreating in the near term. Goldman Sachs recently downgraded EV manufacturers Fisker (FSR) and Lordstown Motors (RIDE). So, let’s look at those names.

Electric vehicle (EV) stocks saw an astonishing rally last year on investors' exuberance over the industry’s huge growth prospects. Worldwide governmental initiatives to shift to zero-emission transport as part of the broader goal to build a sustainable energy-based future motivated investor to bet on EV stocks, in some cases irrespective of their fundamentals. In fact, the industry’s potential  growth made has caused it to now be, arguably, overcrowded with  new entrants.

Nevertheless, the optimism over the industry and the consequent rally in  EV stocks pushed shares of most  industry participants to  valuations that often don’t justify their current fundamentals and growth prospects. Furthermore,  a semiconductor shortage is causing operational disruptions at many established EV manufacturers. Investors also  expect a dip in EV  demand with an anticipated decline in  crude oil prices in the coming quarters.

Consequently,  many EV players that lack the fundamental strength to survive these headwinds are expected lose value.  Goldman Sachs recently downgraded  Fisker Inc (FSR) and Lordstown Motors Corp (RIDE). So, it could be wise to stay away from these stocks now.

Click here to checkout our Electric Vehicle Industry Report for 2021


Fisker Inc. (FSR)

Founded in 2016, FSR focuses on the design, development, manufacture, and sale of electric vehicles. In March, FSR signed a memorandum of understanding with Crédit Agricole Consumer Finance, part of the Crédit Agricole Group—t one of the largest banking groups in Europe—for the  supply of Fisker Ocean SUVs. The Fisker Ocean should deliver latest generation technology and performance to bank’s employees, while manifesting its commitment to a low-carbon fleet.

Shares of FSR have declined 8.7% over the past three months. However, in terms of forward P/B, FSR is currently trading at 4.83x, which is still 28.5% higher than the 3.76x industry average.

FSR’s loss from operations increased 1033.0% year-over-year to $31.31 million for the quarter ended December 31. The company reported a $12.04 million net loss over the same period. Analysts expect FSR’s loss per share for the current year to be $0.85, representing 112.5% year-over-year decline.

FSR’s POWR Ratings are consistent with this bleak outlook. The stock has an overall D rating, which translates to Sell in our proprietary ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

FSR is also rated a D in Stability, Value, and Sentiment. Within the B-rated Auto & Vehicle Manufacturers industry, it is ranked #42 of 53 stocks.

To see additional POWR Ratings for Momentum, Growth, and Quality for FSR, Click here.

Lordstown Motors Corp. (RIDE)

Founded in 2019, RIDE is an original equipment manufacturer of light duty fleet vehicles. It is a manufacturer of Endurance, an electric full-size pickup truck targeted for sale to fleet customers.

This month, RIDE introduced the SCORE San Felipe 250, a full-size EV pickup truck. The vehicle received a positive response and has generated extensive feedback. This successful market innovation should drive the company’s  growth in the coming years.

RIDE’s shares have declined 59.5% over the past three months. However, its forward EV/Sales of 12.84x is 644.8% higher than the 1.72x industry average. Its forward Price/Sales of 19.53x is 1290.7% higher than the 1.4x industry average.

In the fourth quarter ended December 31, RIDE’s loss from operations increased 441.3% year-over-over to $38.55 million. The company reported a $38.24 million net loss over the same period. Its net loss per share came in at $0.23 for the same period.

Analysts expect RIDE’s loss per share for the quarter ended March 31, 2021 to be $0.28, representing 53.8% year-over-year decline.

RIDE’s poor prospects are also apparent in its POWR Ratings. The stock has an overall rating of F, which equates to Strong Sell in our proprietary rating system.

The stock also has an F grade for Growth and Sentiment. Click here to see the additional POWR Ratings for RIDE. (Value, Momentum, Stability, and Quality).

RIDE is ranked #52 of 53 stocks in the same industry.

Click here to checkout our Electric Vehicle Industry Report for 2021

FSR shares rose $0.07 (+0.53%) in after-hours trading Friday. Year-to-date, FSR has declined -10.44%, versus a 11.98% rise in the benchmark S&P 500 index during the same period.

About the Author: Samiksha Agarwal

Samiksha Agarwalhas always had a keen interest in financial markets. This has led her to a career as a financial journalist. Through her extensive knowledge of fundamental analysis, her goal is to help investors identify untapped investment opportunities in the stock market.


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