In the ever-evolving world of electric vehicles (EVs), it’s crucial to identify which EV stocks to sell as investor enthusiasm wanes. The industry, expected to bounce back with falling interest rates, presents a scenario where not all players are likely to recover. Tesla’s (NASDAQ:TSLA) challenging year is a prime example of the broader trend of declining stock values, prompting investors to reassess their holdings.
Despite the downturn, some companies continue to report stellar delivery numbers, indicating robust demand for high-quality EVs remains steady despite economic fluctuations. However, the industry’s fierce competitiveness suggests that not all companies will successfully navigate these difficult times. That reality highlights the importance of determining which EV stocks to divest from as a key investment strategy.
Successfully navigating the EV market requires a meticulous strategy. Swiftly divesting underperforming stocks opens up opportunities for targeted investments in prominent industry leaders. With that said, let’s examine three EV stocks that merit consideration for removal from your investment portfolios.
EV Stocks to Sell: Nikola (NKLA)
Nikola (NASDAQ:NKLA), once an emerging player in the EV sector, is facing turbulent times due to the fraud conviction of its founder Trevor Milton. The scandal significantly damaged the company’s reputation. Additionally, the departure of CFO Anastasiya Pasterick in 2023 suggests more C-suite changes in leadership and an uncertain future ahead.
Furthermore, NKLA’s stock market positioning is deteriorating at a rapid pace, as evidenced by a staggering 72% decline over the past year. That negative sentiment is exacerbated by NKLA’s third-quarter report, which revealed a Non-GAAP earnings-per-share of negative 30 cents, missing expectations by 16 cents. It also showed a shocking revenue shortfall of negative $1.73 million, a drastic drop from the previous year’s $24.21 million.
Moreover, a major recall of battery trucks due to fire risks further exacerbated these challenges. Plus, the company has received a Nasdaq non-compliance notice for its shares falling below the $1 threshold, indicating financial difficulties and issues with market standing. These setbacks underscore Nikola’s struggle to regain its position in a highly competitive EV market.
ChargePoint (CHPT)
ChargePoint Holdings (NYSE:CHPT) has been facing serious challenges this year, including a strategic reorganization that resulted in a 12% reduction in its workforce. While the number of EVs sold in the U.S. has exceeded 350,000, there are limitations for drivers in terms of long-distance travel due to insufficient EV range and a scarcity of fast chargers. These challenges highlight critical gaps in ChargePoint’s infrastructure offerings.
In addition, the financial outlook for ChargePoint appears bleak, with a sharp 81.85% drop in its stock price over the past year. The company’s third-quarter financials reveal further troubles, including GAAP earnings falling short by 43 cents per share, missing analyst estimates by 12 cents. Furthermore, revenue declined by 12% year-over-year to $110.28 million.
To make matters worse, ChargePoint is facing a class-action lawsuit for allegedly concealing vital information and violating securities laws. That legal action has devastated the company’s stock, which plummeted from $46.10 in December 2020 to $2.27 at the time of writing. These setbacks overshadow ChargePoint’s prospects in the EV infrastructure sector.
Faraday Future (FFIE)
Faraday Future (NASDAQ:FFIE) recently faced a major setback when it received a Nasdaq non-compliance notice in late December 2023. The incident added to the company’s history of significant cash burn and limited revenue generation. Moreover, failed deadlines have consistently thwarted the company’s bold ambitions to debut its flagship FF 91 EV, underscoring its continuous operational challenges.
Furthermore, the financial indicators paint a grim picture, with second-quarter GAAP earnings per share dropping to a negative 10 cents. Over the past year, the firm’s shares have plummeted by nearly 99.8%, eroding almost all investor value. That sharp decline indicates not just temporary setbacks but a deep crisis of confidence among stakeholders.
Compounding the grim situation, the number of shares outstanding surged from about 7.8 million at the beginning of 2023 to over 50 million, significantly diluting shareholder value and bringing it to the brink of irrelevance. Faraday Future’s appeal as an investment has greatly diminished due to the absence of a viable path to profitability.
On the date of publication, Muslim Farooque did not hold (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.
