With market conditions showing signs of strain, investors are feeling the heat, suggesting that it may be time to look at electric vehicle (EV) stocks to sell.
Indeed, EV stocks have been a hot topic in financial circles. As we stride into the latter half of 2024, the EV sector seems vulnerable like never before. While yearly EV sales in the United States continue to climb, the rate has slowed down significantly. The case for staying invested in riskier EV stocks becomes less appealing. Even the bellwethers of the EV market are displaying turbulence despite widespread excitement for green technology.
Furthermore, the sector faces considerable headwinds, including high vehicle prices and ongoing range concerns. The lackluster development of charging infrastructure adds an extra degree of complexity, deterring new customers.
With such market conditions and the sector’s apparent pressures, it might be a good time to reassess your portfolios, particularly focusing on selling these three EV stocks.
Nikola (NKLA)
Nikola (NASDAQ:NKLA) was quite a sensation when it entered the EV market. However, the flame has died down significantly. The stock lost almost half its value in just the last six months and now trades for mere pennies.
The company’s downfall began unexpectedly when Hindenburg Research, an investment research firm, accused the company and its founder, Trevor Milton, of false statements regarding its technology. This charge brought Nikola into the spotlight for all the wrong reasons. The situation reached a breaking point last year when Milton was sentenced to four years in prison for securities and wire fraud, leaving the company’s reputation in tatters.
Adding to its challenges, Nikola is struggling to regain its financial footing. This is evident in its first quarter report, as its revenue clocked in at $7.5 million, down 30% from a year ago and missing expectations by nearly half. This bleak financial performance, among other poor metrics, leaves investors skeptical and overshadows any progress the company claims to make.
Lucid (LCID)
Lucid (NASDAQ:LCID) peaked in February 2021 at around $60 per share. The surge was fueled by high hopes and excitement about new developments in the EV industry. However, the stock has experienced a significant downturn since then, with its price plummeting to approximately $3 right now.
A few months back, Lucid obtained a $1 billion investment from Saudi Arabia’s Public Investment Fund affiliate, Ayar Third Investment Company, through convertible preferred stock. While this cash injection is crucial to Lucid’s viability, it also underscores its dependence on external funding as it battles with substantial cash outflows and persistent financial issues.
Under these circumstances, Lucid reduced its previous forecast of 90,000 EVs by 2024 to only 9,000 this year, which casts significant doubts about the company’s capacity to meet customer demand. Additionally, Lucid’s current 9 times forward sales multiple seems clearly out of sync with its current circumstances.
Thus, LCID stock is far from enticing at the moment, especially considering the recent setbacks and ongoing challenges.
Faraday Future (FFIE)
Faraday Future (NASDAQ:FFIE) is making news for being a part of the latest meme stock frenzy. But even in this new world of attention, things look grim for the company. Just last year, FFIE shares reached a whopping $107, yet they’ve dramatically nosedived below $1.
Moreover, in late December 2023, the company received a Nasdaq non-compliance notice, indicating a possible delisting. In a recent 10-K filing, Faraday warned of a “going concern” risk, stating that the company’s liquidity was insufficient to satisfy obligations or maintain operations. Management indicated that bankruptcy is approaching unless additional capital is secured soon.
Furthermore, Faraday’s extremely expensive vehicles, which hover around $300,000, and the declining demand in the EV industry do not bode well for its future. Its plan seems unworkable, given that it had sold four and leased six vehicles by January 2024.
With such a high risk and little reward profile, it’s wise to avoid Faraday at this time.
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On the date of publication, Nabeel Bukhari did not have (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.