Steer Clear Of These 2 Popular Electric Vehicle Stocks

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The electric vehicle (EV) industry has become one of the hottest, with staggering growth potential this year after an impressive run last year. While increasing awareness of climate change and governmental pledges concerning global warming and a sustainable energy future have been a key factor driving the EV boom, it should be kept in mind that the automotive industry is still struggling with pandemic disruptions.

Governments worldwide are now focused on providing direct relief to citizens through stimulus checks to boost economic activity rather than focusing on infrastructure redevelopment. Though the unemployment rate in the U.S. declined slightly last week, hiring is still weak, implying a prolonged period of weak consumer spending. While economies are struggling to recover, the EV industry is gaining momentum based on speculation, leading to the formation of a potential asset bubble.

Companies such as NIO Limited (NIO) and Workhorse Group Inc. (WKHS) have quadrupled in value over the past year, but have failed to deliver requisite earnings growth. Given the rising volatility in the broader markets, we think these companies are likely to plummet soon.

NIO Limited (NIO)

This Chinese EV manufacturer has attracted significant investor attention due to its reputation as the “Tesla of China.” As the pioneer of the Battery-as-a-Service’ business model, NIO has hit record highs in terms of revenues, demonstrating its cost-efficient production methods and unrestricted access to lithium - a key raw material required in EVs.

Surging investor optimism has driven to a 1177.2% gain over the past year and the stock has gained 1624.6% over the past nine months. While the company maintains impressive sales margins, it has yet to turn a profit.

NIO delivered 7,225 vehicles in January, up 352.1% year-over-year. Its revenues have increased 146.4% from the year-ago value to $666.60 million in the third quarter ended Sept. 30, 2020. However, NIO reported a loss from operations of $139.30 million, and a $154.20 million net loss over this period. Its net loss per American depository share was $0.14.

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James B. Paxton 2 weeks ago Member's comment

Haha $WKHS is kicking ass I love it!! When bearish articles and bears come out left and right you just know we are flying!

Alpha Stockman 2 weeks ago Member's comment

I think this author is unfairly biased against these companies.

Adam Reynolds 2 weeks ago Member's comment

Fan boys can't accept any criticism.

William K. 2 weeks ago Member's comment

Once al of those electric cars are on the road for a while there will be a fairly loud question arise. Folks will be wondering where all of the power to recharge them is going to come from. Every one of those EVs is going to have a battery pack and each of those battery packs is going to need recharging. And unlike gasoline, electric power can't be dumped in to a tank to await being needed.

But that will not be the worst of the problems. When the shortage becomes obvious then the prices will rise quite a lot.

Do you remember paying $4+ for a gallon of gas a decade and a half ago? It will be far worse that that this next time because there will be no escape options available.

Bill Johnson 2 weeks ago Member's comment

I think these are two of the most likely EV stocks to rocket. I foresee CCP ensuring #NIO competes with #Tesla on the world stage. NIO will go deep into triple digits. $NIO $WKHS $TSLA

Carol Klein 2 weeks ago Member's comment

If everyone thought like this author, we'd have no R&D.

William K. 2 weeks ago Member's comment

Wishing something would be true does not make it true. WANTING VERY MUCH for it to be true does not make it true, and believing something is true will not make it true. Reality is brutal that way.

Duke Peters 2 weeks ago Member's comment

The problem is that some authors try to scare people out of shares! It's just a pathetic way to make money.. shorting is trash.

Susan Miller 2 weeks ago Member's comment

William, you are a wise man!