Beware These 4 Overvalued Electric Vehicle Companies

Xpeng, Inc. (XPEV)

XPEV is one of the most popular names in the Chinese EV industry. Founded in 2014, the company listed its shares on NYSE last August. XPEV listed 85 million American Depository shares, raising approximately $1.5 billion.

XPEV’s vehicle deliveries increased 265.8% year-over-year in the third quarter ended Sept. 30, 2020. The company reported record monthly deliveries of 6015 vehicles in January, up 470% from the year-ago value. Its revenues have increased 342.5% from the same period last year to RMB1,990.10 million.

However, despite these impressive sales and vehicle delivery figures, XPEV has yet to turn profitable. XPEV’s net loss increased 48% from the prior year quarter to RMB1,148.80 million. The company also reported a net loss of RMB5.07 per share over this period.

Despite its low profitability and negative earnings, XPEV has gained 40.6% over the past three months, owing to the rising popularity of the EV industry. In terms of forward price/sales, XPEV has recently been trading at 41.26x, 2773.4%, which is more expensive than the industry average of 1.44x. Its forward ev/sales of 38.63x is 2192.5% more expensive than the industry average of 1.69x.

One of the main reasons behind XPEV’s uncertain growth prospects in the U.S., making it a relatively overvalued stock, is the increased federal scrutiny of Chinese companies trading on U.S. stock exchanges. Several Chinese stocks were banned from trading on the NYSE and NASDAQ last December. The exchanges are currently planning to ban tech and e-commerce giants Alibaba (BABA) and Tencent (TCEHY) soon, based on security concerns.

Analysts expect XPV’s EPS to remain negative in fiscal 2021. Furthermore, the company’s EPS is expected to decline at a rate of 5.2% per annum over the next five years. A consensus revenue estimate of $2.13 billion for the current year represents a 145.1% improvement year-over-year.

XPEV has an overall rating of F, which equates to Strong Sell in our POWR Ratings system. It has an F grade for Stability, and a D grade for Value and Quality. XPEV is ranked #45 in the Auto & Vehicle Manufacturers industry. You can check out additional POWR Ratings for Growth, Sentiment, and Momentum here.

Nikola Corporation (NKLA)

NKLA made headlines earlier this year when it went public through a SPAC with blank check company Vector IQ. The company has designed first-of-their-kind hydrogen fuel-cell powered electric trucks, which quickly became a big hit. As investors bought into the hype, NKLA gained 178.5% within just five days of its public debut on June 4 to hit its all-time high of $93.99.

However, the bubble soon burst. Hindenburg Research released an article stating several instances of misconduct by the company and its CEO Trevor Milton. NKLA allegedly falsified the type of technology used in its production to sway investors, and allegedly published misleading reports regarding the progress in production. Following the report, Milton resigned in September.

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