Despite the promising future demand outlook for electric vehicles (EVs), the EV industry is currently facing several challenges, including a global slowdown in demand, oversupply, heightened competition, high interest rates, consumer concerns over the lack of infrastructure, etc. Given the industry’s challenges, investors could look to avoid EV makers Tesla, Inc. (TSLA) and NIO Inc. (NIO).
Before diving deeper into the fundamentals of these stocks, let’s understand what’s ailing the electric vehicle industry’s outlook.
According to Rho Motion, global sales of fully electric and plug-in hybrid vehicles (PHEVs) rose 31% in 2023, down from 60% growth in 2022. EV sales have slowed down considerably due to higher interest rates, a drop in EV subsidies in various countries, consumers’ concerns over range, the absence of sufficient public charging infrastructure, and a lack of affordable options.
Meanwhile, sales of hybrid cars have been rising at the expense of EVs due to their solid performance metrics, improved reliability, and superior mileage compared to battery-powered vehicles. EV makers like TSLA and NIO have been facing intense competition in the world’s largest EV market, China, leading them to offer price cuts or other sales incentives.
Despite undertaking price cuts, TSLA reported vehicle deliveries of 386,810, a drop of 8.5% year-over-year, marking its first year-over-year decline since 2020. Meanwhile, NIO delivered 11,886 vehicles in March, taking its first-quarter total to 30,053 BEVs. NIO had cut its first-quarter delivery forecast to around 30,000 vehicles, down from its March 5 target of between 31,000 and 33,000.
Concerns about tepid global EV demand have led automakers to scale back their aspirations of going all-electric. With heightened competition and price wars, EV makers' margins and demand outlook are expected to take a hit.
Tesla, Inc. (TSLA)
TSLA designs, develops, manufactures, leases, and sells electric vehicles, and energy generation and storage systems internationally. It operates in two segments Automotive and Energy Generation and Storage.
In terms of forward non-GAAP P/E, TSLA’s 62.30x is 307.1% higher than the 15.31x industry average. Its 6.04x forward non-GAAP PEG is 314.8% higher than the 1.46x industry average. Likewise, its 5.11x forward EV/Sales is 329.8% higher than the 1.19x industry average.
TSLA’s total revenues for the fiscal fourth quarter ended December 31, 2023, came in at $25.17 billion. Its adjusted EBITDA declined 26.9% from the year-ago value to $3.95 billion.
The company’s non-GAAP net income attributable to common stockholders decreased 39.5% over the prior-year quarter to $2.49 billion. Also, its EPS attributable to common stockholders came in at $0.71, down 40.3% year-over-year.
Street expects TSLA’s EPS and revenue for the quarter ended March 31, 2024, to decrease 36.5% and 2% year-over-year to $0.54 and $22.86 billion, respectively. It failed to surpass the Stress EPS estimates in three of the trailing four quarters. Over the past nine months, TSLA’s stock has declined 35.3% to close the last trading session at $174.60.
TSLA’s POWR Ratings reflect its grim outlook. It has an overall rating of D, equating to a 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 Value and a D for Growth, Momentum, Stability, and Sentiment. It is ranked #42 out of 52 stocks in the Auto & Vehicle Manufacturers industry. Beyond what we stated above, we also have given TSLA’s grade for Quality. Get all TSLA ratings here.
NIO Inc. (NIO)
Headquartered in Shanghai, China, NIO designs, develops, manufactures, and sells smart electric vehicles in China. It offers five- and six-seater electric SUVs, as well as smart electric sedans. The company also offers power solutions, including Power Home, Power Swap, Power Charger, and Destination Charger; Power Mobile, Power Map, and One Click for Power valet service.
In terms of forward Price/Sales, NIO’s 0.95x is 7.4% higher than the 0.88x industry average. Likewise, its 4.65x forward Price/Book is 94.2% higher than the 2.39x industry average.
NIO’s total revenues for the fourth quarter ended December 31, 2023, stood at RMB17.10 billion ($2.36 billion) while its adjusted loss from operations narrowed 29.5% year-over-year to RMB4.24 billion ($585.71 million).
In addition, adjusted net loss attributable to ordinary shareholders of NIO narrowed 21.9% year-over-year to RMB3.95 billion ($545.65 million). Its adjusted net loss per share attributable to ordinary shareholders narrowed 25.7% year-over-year to RMB2.28.
For the quarter ended March 31, 2024, NIO’s EPS is expected to remain negative. Its revenue for the same quarter is expected to decrease 1.5% year-over-year to $1.48 billion. It failed to surpass the consensus EPS estimates in each of the trailing four quarters. Over the past nine months, the stock has declined 58.7% to close the last trading session at $4.46.
NIO’s weak fundamentals are reflected in its POWR Ratings. It has an overall rating of D, which translates to a Sell in our proprietary rating system.
It has an F grade for Sentiment and a D for Momentum, Stability, and Quality. It is ranked #44 in the same industry. To see NIO’s Growth and Value ratings, click here.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
TSLA shares were trading at $172.50 per share on Friday morning, down $2.10 (-1.20%). Year-to-date, TSLA has declined -30.58%, versus a 8.38% rise in the benchmark S&P 500 index during the same period.
About the Author: Abhishek Bhuyan
Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments.
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