The heightened consciousness regarding environmental concerns, alongside the progression in Electric Vehicle (EV) technology, has sparked a surge in consumer interest in electric vehicles. With improvements in affordability, extended driving ranges, and the expansion of charging infrastructure, an increasing number of consumers are opting for EVs as a practical substitute for traditional automobiles.
Against the backdrop, this article sheds light on the fundamentals of three EV stocks: XPeng Inc. (XPEV), Arcimoto, Inc. (FUV), and Honda Motor Co., Ltd. (HMC). While it is advisable to steer clear of XPEV and FUV considering their weak fundamentals, HMC, on the contrary, could be a solid portfolio addition.
But before we jump into the fundamentals of the highlighted stocks, let’s briefly examine the prevailing dynamics of the EV market.
Despite encountering challenges like the pandemic and supply chain disruptions, the EV market has witnessed significant growth. As awareness of environmental issues and sustainability grows, there is a notable desire among consumers to shift toward cleaner and more fuel-efficient vehicles.
According to Statista, the global revenue in the EV market is projected to hit a staggering $623.30 billion this year and climb up to a remarkable $906.70 billion by 2028, demonstrating a 9.8% CAGR from 2024 to 2028.
On the other hand, S&P Global Mobility's 2024 global sales projection shows that battery-electric passenger vehicles will reach 13.3 million units worldwide in 2024, representing approximately 16.2% of total global passenger vehicle sales for the year. Meanwhile, during the fourth quarter of 2023, the global battery-electric vehicle market reached notable milestones, with sales flourishing across several nations.
For instance, in China, BEV sales surpassed the two million mark for the quarter, marking a remarkable achievement unprecedented in the country's history. Similarly, annual BEV sales in the United States exceeded 1 million units for the first time in 2023.
While predictions and quarterly sales indicate a promising year ahead for the EV market, various factors such as government protectionism, decreased incentives, supply chain disruptions stemming from geopolitical tensions, and uncertainties surrounding future commitments to drive vehicle electrification by U.S. presidential administrations could potentially hinder market expansion.
Keeping all the aforementioned factors in mind, let’s examine the fundamentals of featured Auto & Vehicle Manufacturers stocks.
Stocks to Avoid:
XPeng Inc. (XPEV)
Headquartered in Guangzhou, China, XPEV designs, develops, manufactures, and markets smart EVs. It offers SUVs under the G3, G3i, and G9 names, four-door sports sedans under the P7 and P7i names, and family sedans under the P5 name.
XPEV’s trailing-12-month gross profit margin of 0.52% is 98.5% lower than the industry average of 35.38%. Its trailing-12-month asset turnover ratio of 0.32x is 67.6% lower than the 0.99x industry average. Furthermore, the stock’s trailing-12-month negative EBITDA margin of 44.32% compares to the industry average of 10.89%.
For the fiscal third quarter, which ended on September 30, 2023, XPEV’s total revenue stood at $1.17 billion, while its non-GAAP loss from operations widened 50% year-over-year to $416.19 million.
Furthermore, its non-GAAP net loss attributable to ordinary shareholders of XPEV worsened by 25.5% from the prior-year quarter to $382.46 million. In addition, the company’s non-GAAP net loss per ADS came in at $0.44, worsening 24.7% from the year-ago value.
Street expects XPEV’s revenue for the fiscal fourth quarter (ended December 2023) to come in at $1.73 billion. While its loss per share for the same quarter is projected to come in at $0.42, widening 11.5% year-over-year. Moreover, the company failed to surpass its estimated EPS and revenue in three of the trailing four quarters.
XPEV’s shares have plummeted 46.5% over the past six months and 41.7% over the past month to close the last trading session at $8.19.
XPEV’s POWR Ratings reflect this bleak outlook. The stock has an overall F rating, translating to a Strong Sell in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has an F grade for Stability and Sentiment and a D for Value, Momentum, and Quality. In the 52-stock Auto & Vehicle Manufacturers industry, it is ranked #49. Click here to see XPEV’s rating for Growth.
Arcimoto, Inc. (FUV)
FUV designs, develops, manufactures, sells, and rents three-wheeled electric vehicles in the United States. Its flagship product, the Fun Utility Vehicle (FUV), is used for everyday consumer trips.
On November 28, 2023, FUV revealed that it received a notice from Nasdaq indicating non-compliance with Nasdaq Listing Rule 5250(c)(1) due to the delayed filing of its quarterly report for the period ended September 30, 2023. While this doesn't currently impact the stock's listing or trading, further delays could affect it.
Moreover, FUV was required by Nasdaq to submit a compliance plan by January 22, 2024, and file the overdue report by May 20, 2024. The company aims to file the report as soon as possible.
FUV’s trailing-12-month negative gross profit margin of 160.15% compares to the industry average of 35.38%. Its trailing-12-month asset turnover ratio of 0.13x is 86.8% lower than the 0.99x industry average. Furthermore, the stock’s trailing-12-month cash per share of $0.15 is 93.4% lower than the industry average of $2.33.
For the fiscal second quarter, which ended on June 30, 2023, FUV’s revenue stood at $1.76 million, while its loss from operations came in at $7.29 million. During the same quarter, the company reported a net loss and loss per share of $13.21 million and $1.71, respectively.
Analysts predict FUV’s revenue for the fiscal third quarter (ended September 2023) to decline 1.2% year-over-year to $2 million, while its EPS for the same quarter is projected to come in at negative $0.79. Additionally, the company has a disappointing revenue surprise history, failing to surpass its revenue estimates in each of the trailing four quarters.
The stock has plunged 57.7% over the past six months and 20.9% over the past month to close the last trading session at $0.66.
FUV’s grim fundamentals are reflected in its POWR Ratings. It has an overall rating of D, which equates to a Sell in our proprietary rating system.
It has an F grade for Stability and Quality. Within the same industry, it is ranked #47. Click here to see the other ratings of FUV for Growth, Value, Momentum, and Sentiment.
Stock to Buy:
Honda Motor Co., Ltd. (HMC)
Headquartered in Tokyo, Japan, HMC develops, manufactures, and distributes motorcycles, automobiles, power, and other products in Japan, North America, Europe, Asia, and internationally. It operates through four segments: Motorcycle Business; Automobile Business; Financial Services Business; and Power Product and Other Businesses.
HMC’s trailing-12-month levered FCF margin of 8.19% is 51.3% higher than the industry average of 5.41%. Its trailing-12-month EBITDA margin of 12.94% is 18.9% higher than the 10.89% industry average. Furthermore, the stock’s trailing-12-month cash per share of $6.04 is 159.8% higher than the industry average of $2.33.
HMC’s sales revenue for the fiscal second quarter (ended September 30, 2023) increased 17.1% year-over-year to ¥4.98 trillion ($33.55 billion), while its operating profit improved 30.7% from the year-ago value to ¥302.13 billion ($2.04 billion).
Moreover, the company’s profit for the period rose 32.1% from the prior-year quarter to ¥270.98 billion ($1.83 billion). Also, its EPS came in at ¥51.49, representing an increase of 39.4% year-over-year.
The consensus revenue estimate of $136.50 billion for the fiscal year ending March 2024 represents a 412.1% improvement year-over-year. Meanwhile, the consensus EPS estimate of $4.19 for the same period reflects a 46.6% year-over-year surge.
HMC’s shares have climbed 8.9% over the past month to close the last trading session at $33.53.
It’s no surprise that HMC has an overall rating of A, which equates to a Strong Buy in our proprietary rating system. It has an A grade for Stability and a B for Value, Sentiment, and Quality. Out of 52 stocks in the same industry, it is ranked #3.
In addition to the POWR Ratings we’ve stated above, we also have HMC’s ratings for Growth and Momentum. Get all HMC ratings here.
What To Do Next?
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HMC shares were trading at $33.76 per share on Monday morning, up $0.23 (+0.69%). Year-to-date, HMC has gained 9.22%, versus a 3.45% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Mukherjee
Anushka's ultimate aim is to equip investors with essential knowledge that empowers them to make well-informed investment choices and attain sustained financial prosperity in the long run.
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