March 3, 2021 6 min read
This story originally appeared on StockNews
Global demand for electric vehicles remained strong, and sales continued to grow strongly in 2020 even during the COVID-19 lockdown restrictions. Electric vehicle sales continued to grow in 2021, with certain brands leading the way in product offerings and in managing online sales.
While Tesla, Inc. (TSLA) stole all the headlines, several new EV players have been formed trying to bring tough competition to the EV juggernaut. However, not all newcomers have sufficient fundamental strength to be successful in the face of intense competition. As the EV giants grow rapidly, many new players have yet to expand their production capacity to meet the growing demand. In addition, some of these companies lack sufficient financial strength to justify their award ratings.
Now that major automakers are entering the EV space, the market for aspiring EV players like XPeng Inc. (received XPEV rating), Li Auto Inc. (received LI rating) and Workhorse Group Inc. is likely to get even tougher . (WKHS rating received). Given investor concerns about overvaluation and poor near-term growth prospects, these stocks have declined since the start of the year.
XPeng Inc. (XPEV Rating Received)
Headquartered in Guangzhou, China, XPEV is a manufacturer and marketer of intelligent electric vehicles in China and the United States. The company’s portfolio includes SUVs under the name G3 and a four-door sports sedan under the name P7. It also offers vehicle leasing, bank loans, and auto insurance services.
Last month, XPEV shipped 2,223 Smart EVs, including 1,409 P7s and 814 G3s. This represents a 63% decrease from the company’s record-breaking January shipments. It reflects a seasonal drop in shipments due to the weeklong Chinese New Year holidays.
Also in February, the company delivered its second batch of more than 200 intelligent electric G3 SUVs for the Norwegian market. The delivery was another step in XPEV’s long-term commitment to building an international presence.
XPEV’s general and administrative expenses increased 320.8% year over year to RMB 1,203.8 million in the third quarter ended September 30, 2020. The company’s non-GAAP operating loss was RMB 822.6 million and net non-GAAP loss was RMB 864.9 million. Additionally, the non-GAAP loss per share was RMB 2.16 for the period.
The company’s EPS is projected to decrease 5.2% annually over the next five years. The stock is down 26.5% since the start of the year and is currently trading 57.7% below its 52-week high of $ 74.49, indicating a short-term downward move. In terms of value for money after 12 months, XPEV is currently trading at 15.58x and 1015.4% above the industry average of 1.40x.
XPEV’s POWR ratings are in line with this dire outlook. The stock has an overall rating of F, which results in a strong sell on our proprietary rating system. The POWR ratings are calculated taking into account 118 different factors, with each factor being optimally weighted.
XPEV has an F grade for stability and a D grade for value and quality. It ranks 45th out of 52 stocks in the auto and vehicle manufacturer sector with a B rating.
In addition to the POWR rating grades I just highlighted, you can view the XPEV ratings for growth, momentum, and sentiment.
Li Auto Inc. (LI Rating Received)
Formerly known as Leading Ideal Inc., LI designs, manufactures and sells intelligent electric sport utility vehicles (SUVs) in China. The company offers Li ONE, a six-seater electric SUV equipped with a range of extension systems and intelligent vehicle solutions.
Last month, the company shipped 2,300 Li ONEs, an increase of 755% over the previous year. However, the number was a 57.2% decrease from 5,379 Li ONE shipments in January. The decrease was due to seasonal factors related to the Chinese New Year holidays and localized COVID-19 outbreaks in northern China.
Last December, LI announced a follow-up offer of 47 million US securities account shares at a price of US $ 29.00 per ADS. Proceeds from the offer will be used to develop next-generation EV technologies and autonomous driving technologies.
LI’s vehicle margin was 17.1% for the fourth quarter ended December 31, 2020 compared to 19.8% for the third quarter of 2020. Non-GAAP loss from operations was RMB 71.1 million. The gross margin declined 2.3% sequentially to 17.5% while operating expenses increased 18.7% sequentially to RMB 803.5 million during this period.
The stock is down 17.7% year-to-date and is currently 50.2% below its 52-week high of $ 47.7, indicating a short-term downward move. Additionally, the stock appears to be extremely overvalued right now. In terms of trailing 12 month sales / sales, LI is currently trading at 12.91x, 640.8% above the industry average of 1.74x.
LI’s weak outlook is also reflected in the POWR ratings. The stock has an overall rating of D, which equates to a sale in our proprietary rating system. LI also has a D rating for value and quality and an F for stability. In the same industry, the share ranks 42nd.
Click here to view additional POWR growth, sentiment, and momentum ratings for LI.
Workhorse Group Inc. (WKHS Rating Received)
Formerly known as AMP Holding Inc., WKHS manufactures and sells battery electric vehicles and aircraft in the United States. The company sells extended-range electric and medium-duty delivery vans under the Workhorse brand and develops telematics performance monitoring systems that fleet operators can use to optimize energy and route efficiency.
On March 1, the law firm Schall announced that it was investigating WKHS for violations of the Securities Act on behalf of its shareholders. Bronstein, Gewirtz & Grossman, LLC and the Rosen law firm have also announced lawsuits arising out of allegations that WKHS has provided misleading business information to shareholders.
WKHS general and administrative expenses increased 30.6% year over year to $ 4.7 million for the fourth quarter ended December 31, 2020. The company’s net income was $ 280.5 million, compared to net income of $ 655,000 for the fourth quarter of 2019. The cost of goods sold increased 233.3% year over year to $ 7.0 million, reflecting higher costs of production and Warranty costs.
A consensus-based EPS estimate for the current year means a decrease of 158.6% compared to the previous year. The stock is down 18.5% since the start of the year and is currently trading 62.5% below its 52-week high of $ 42.96, indicating a short-term downward move. In terms of value for money after 12 months, WKHS is currently trading at 1850.59x, which is well above the industry average of 1.40x.
WKHS ‘weak fundamentals are reflected in the POWR ratings. The stock has an overall rating of F, which is a strong sell on our POWR rating system. WKHS has the grade F for value, stability and quality. In the same industry, the share ranks 51st.
Overall, we rate WKHS for eight different components. In addition to the above, we’ve also given WKHS grades for momentum, growth, and sentiment. This is where you can get all of the WKHS ratings.
The POWR ratings are calculated taking into account 118 different factors, with each factor being optimally weighted.