The growth of the electric vehicle (EV) market is fueled by favorable public and private investment and robust demand amid sustainability initiatives globally. However, high EV prices have deprived optimal sales. According to Kelley Blue Book, the average price of a new EV is $66,000, up 4% from the previous month and 14% from last year.
In addition, the margins for the auto industry are also impacted by higher interest rates and inflation charges. Moreover, the lack of proper EV charging infrastructure is restricting the industry's growth.
According to Researchers at Sandia National Laboratories, "Electric vehicle charging infrastructure has several vulnerabilities ranging from skimming credit card information—just like at conventional gas pumps or ATMs—to using cloud servers to hijack an entirely electric vehicle charger network."
Given the backdrop, fundamentally weak EV stocks Li Auto Inc. (LI), XPeng Inc. (XPEV), and Mullen Automotive Inc. (MULN) might be best avoided, liquidated, or sold short in 2023.
Li Auto Inc. (LI)
Headquartered in Beijing, China, LI designs and sells new energy cars in the People's Republic of China. The company's primary products are sport utility vehicles (SUVs) sold under the Li ONE brand.
LI's forward EV/Sales multiple of 2.27 is substantially higher than the 1.15 industry average. Also, its forward Price/Sales multiple of 3.13, compared with the industry average of 0.86.
LI's trailing-12-month ROCE of negative 4.67% is lower than the industry average of 12.81%, while its trailing-12-month negative ROTA of 2.49% is lower than the industry average of 4.45%.
LI's loss from operations came in at RMB 2.13 billion ($299.39 million) for the third quarter that ended September 30, 2022, up 2077.6% year-over-year. Its net loss came in at RMB 1.65 billion ($231.35 million), up 7554.4% year-over-year. Moreover, the company's EPS came in at RMB1.68 (US$0.24), up 8300% year-over-year.
Analysts expect LI's EPS to decrease 32.84% year-over-year to $0.05 for the quarter ending March 2023. Over the past six months, the stock has lost 39.1% to close the last trading session at $22.98.
LI's poor fundamentals are reflected in its POWR Ratings. The stock's overall D rating is a Sell in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
LI has an F grade for Stability and a D for Growth and Value. Within the D-rated Auto & Vehicle Manufacturers industry, it is ranked #43 out of 61 stocks. Click here for the additional POWR Ratings for Sentiment, Momentum, and Growth for LI.
XPeng Inc. (XPEV)
XPEV is headquartered in Guangzhou, China. It is a designer, developer, manufacturer, and seller of intelligent EVs in China. Its offerings include SUVs under the G3 name, four-door sports sedans under the P7 name, and family sedans under the P5 name.
XPEV's forward EV/Sales multiple of 1.78 is substantially higher than the 1.15 industry average. Also, its forward Price/Sales multiple is trading at 2.53, substantially higher than the industry average of 0.86.
XPEV's trailing-12-month ROCE of negative 19.35% is lower than the industry average of 12.81%, while its trailing-12-month negative ROTA of 11.23% is lower than the industry average of 4.45%.
XPEV's total revenues came in at $959.23 million for the third quarter that ended September 30, 2022, down 19.3% year-over-year. Its loss from operations came in at $306.01 million, up 17.2% year-over-year. Moreover, the company's net loss came in at $334.04 million, up 49% year-over-year.
XPEV's revenue is expected to decrease 14.7% year-over-year to $883.68 million for the quarter ending March 2023. Its EPS is slated to fall 7.8% per annum for the next five years. It missed EPS estimates in three out of four trailing quarters. Over the past year, the stock has lost 75.7% to close the last trading session at $11.56.
XPEV's POWR Ratings reflect this bleak outlook. The stock has an overall F rating, equating to Strong Sell in our proprietary rating system. It also has an F for Stability and a D for Sentiment, Sentiment, and Quality. It is ranked #56 in the Auto & Vehicle Manufacturers industry.
Beyond what is stated above, we've also rated XPEV for Momentum and Value. Get all XPEV ratings here.
Mullen Automotive Inc. (MULN)
MULN is an electric vehicle manufacturer and distributor. Additionally, it runs the digital platform CarHub, which uses AI to give a user-friendly way to buy, sell, and own a car. It sells battery technology and emergency point-of-care solutions.
MULN's trailing-12-month Price/Book multiple of 8.73 is 339.5% higher than the 1.99 industry average.
MULN's trailing-12-month negative ROTC of 618.14% is lower than the 6.59% industry average. Its trailing-12-month ROTA of negative 169.94% is lower than the 4.45% industry average.
MULN's loss from operations came in at $18.22 million for the third quarter that ended June 30, 2022, up 184.5% year-over-year. Its net loss came in at $59.47 million, up 289.9% year-over-year. In addition, its general and administrative expenses came in at $10.90 million, up 121.2% year-over-year.
Over the past year, the stock has lost 94% to close the last trading session at $0.34.
MULN overall F rating equates to a Strong Sell in our POWR Ratings system. It also has an F grade for Value and Stability and a D for Sentiment and Quality. The stock is ranked #57 in the same industry.
Click here to access the additional POWR Ratings for MULN (Growth and Momentum).
LI shares were trading at $23.10 per share on Thursday afternoon, up $0.12 (+0.52%). Year-to-date, LI has gained 13.24%, versus a -0.38% rise in the benchmark S&P 500 index during the same period.
About the Author: RashmiKumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.
3 EV Stocks to Avoid in 2023 StockNews.com
