As the bull market charges ahead, savvy investors are effectively optimizing their portfolios, making it imperative to scrutinize the electric vehicle (EV) sector, once hailed as a paragon of portfolio growth. Currently, the industry is navigating through a tempestuous phase, branding certain struggling EV stocks as remarkably unattractive.
EV pioneer and industry leader Tesla (NASDAQ:TSLA), previously the vanguard of the sector, is marking its most abysmal start to a year, a sentiment resonating industry-wide as numerous EV manufacturers witness their shares drop to unprecedented lows.
In the U.S., the situation intensifies with the EV SPAC bubble undergoing a major burst. This confluence of challenges paints a stark picture for the EV market, compelling investors to reevaluate and reinforcing the need for a strategic and cautionary approach in the face of the industry’s uncertain near-term trajectory.
Lucid (LCID)
Once the darling of investors betting on the burgeoning EV market, Lucid (NASDAQ:LCID) is navigating through troubled waters. Its stock, which soared to a high of $55 per share in late 2021, has since plummeted by more than 90%, leading to its removal from the Nasdaq 100 index, a major blow to investor confidence.
The company’s production numbers add to the concern, declining to 2,391 vehicles in the fourth quarter from 3,493 a year earlier. Overall, Lucid Group produced 8,428 vehicles and delivered only 6,001. This underwhelming performance is compounded by a revision of its 2023 production forecast, which it slashed a month ago from an ambitious 10,000 vehicles to a meager 8,000 to 8,500.
Furthermore, Lucid’s consistent failure to meet its pre-IPO commitments casts a long shadow over its credibility. The mounting operating losses, reflected in a dismal profitability rank of 1 out of 10 by GuruFocus, further exacerbate investor apprehensions, making Lucid a textbook case of unfulfilled potential in the EV sphere.
Nikola (NKLA)
Once a beacon in the electric truck market, Nikola (NASDAQ:NKLA) faces a grim reality. Struggling to keep its stock above the critical $1 mark, the firm has received yet another warning from NASDAQ, signaling a potential delisting.
However, this isn’t uncharted territory for Nikola; a similar caution was issued in May 2023. Since then, the company hasn’t shown any signs of significant growth, with its stock nosediving by more than 70% in the past six months. The ongoing saga of fraud allegations and the founder’s conviction casts a long shadow over Nikola’s future.
Embarking on a journey for redemption with new management and an Arizona plant, Nikola aimed to rewrite its story. However, 2023 has brutally quashed any flickers of hope for a turnaround. The CFO’s resignation amidst product recalls and losses, which grew over 5,700% from 2017 to the trailing twelve months to a negative $1.03 billion, added to the narrative of a company in freefall. Having squandered its second chance, Nikola is starkly out of step with this reality.
Fisker (FSR)
Fisker (NYSE:FSR) emerges as a textbook example of an EV stock to avoid, a name you’d be wise to leave out from your investment portfolio. Plagued by unfulfilled promises and recurring issues with its Fisker Ocean model, its reliability becomes increasingly questionable. Moreover, Fisker found itself in hot water with the National Traffic Highway Safety Administration of late over serious braking concerns, a red flag for any potential car owner.
In a telling revelation of its operational woes, Fisker delivered just 4,700 vehicles out of the 10,000 produced last year, leaving a sizeable inventory surplus from 2023. This excess and a recent cutback in production goals indicate a lack of confidence in meeting future production targets. Despite attracting interest from over 100 dealers, the pivot to a dealership model smacks of desperation in liquidating lingering inventory. With an unsettling $290 million worth of unsold cars, Fisker’s financial footing appears remarkably shaky, casting further doubt on its viability. This makes it one of those struggling EV stocks.
On the date of publication, Muslim Farooque 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