2023 was a bad year for EV stocks.
Market headwinds, dwindling demands, and softening government support are beating down companies left and right. Combine that with overly aggressive spending and diminishing revenues, and we have a recipe for disaster.
While growth over the long term is still in the cards for some of them, it might be advisable to start pruning your portfolio of the most affected EV stocks until things get better. That way, you can avoid looming sell-offs as things in the EV space worsen. In the spirit of avoiding losses, you might want to sell three EV stocks from your portfolios.
Fisker Inc. (FSR)
Fisker Inc. (NYSE:FSR) is an EV firm that designs and develops electric vehicles. Its Fisker Flexible Platform Agnostic Design (FF-PAD) allows it to design, develop, and adapt a car into a Fisker-qualified EV platform in a specific size.
Fisker Ocean, the company’s crossover SUV released in 2023, received mixed responses from the market. Some reviewers praised its build quality and interior. Criticisms have been thrown at key fob issues, software problems, and missing functionalities. Hopefully, the company’s upcoming releases—Fisker Alaska, Fisker Pear, and Fisker Ronin—won’t have the same issues.
Furthermore, 2023 production delays and unexpected headwinds plagued its operations and significantly affected its financials. The Q4 of 2023’s gross margin ended at 35% lower. And, Q4 EPS ended at a $1.23 loss. But that’s not even the worst part, as that loss makes up 55% of the full-year EPS loss of $2.22. Meanwhile, full-year cash and cash equivalents dropped by 56% from $736.55 million to $325.45 million.
Also, FSR received a non-compliance notice from the NYSE as it’s stock traded below $1 for 30 consecutive trading days. So, this could potentially lead to its delisting. This unfortunate string of challenges has reduced FSR from a promising EV manufacturer to a company teetering on the edge of bankruptcy.
On top of reducing overhead, facilities, and manpower, FSR mentioned discussions for getting fresh funds from an existing noteholder. However, none of this is confirmed, which doesn’t incite much confidence. Investors might want to sell FSR and look for other EV stocks.
Faraday Future Intelligent Electric Inc. (FFIE)
A standard disclaimer on brokerage platforms says there’s a possibility for significant losses, including the entirety of your capital, although that’s not too common.
Unfortunately, that disclaimer is now a painful reality for investors of Faraday Future Intelligent Electric Inc. (NASDAQ:FFIE), especially if they bought in last year and remain holding on. As a reminder, the company manufactured the FF91 Futurist Alliance, a luxury EV priced at $309,000.
As of the time of writing, the stock price has gone from last year’s $100 to $0.10, registering a rare -99.9% 1-year return. FFIE is trying to keep the company available on the market and address Nasdaq’s non-compliance notice. Yet, its stocks have undergone two stock splits within half a year of each other. This is rarely a good sign.
Further, financials are even more alarming. The company is still not generating revenue, with its latest quarterly report recording $551,000 in auto sales. That’s less than the price of two Futurist Alliance EV units. Also, its competition with industry heavyweights in the luxury EV market is not a great sign.
While the company highlights operational improvements and expansion plans, it has realized significant losses and cash burn. Investors still holding onto hope might have a better chance if they sell FFIE and get other EV stocks.
Nikola (NKLA)
In the case of Nikola Corporation (NASDAQ:NKLA), problems started when founder and ex-CEO Trevor Milton was found guilty of multiple counts of fraud in 2022. It stemmed from false statements he made about the company with the explicit aim of artificially inflating share prices. He’s no longer involved with Nikola. So, former GM exec Thomas Okray took the reins and enacted a company-wide change, including reshuffling C-suite positions.
In mid-2023, the company looked like it was making a comeback, but the rally was short-lived. Last year, NKLA recalled 209 electric semis due to a battery manufacturing defect, causing two fires and thousands of dollars in damages. Now, NKLA is trading near $0.60, a far cry from its $3.71 52-week high. Naturally, the company’s dismal stock price attracted Nasdaq’s attention. In fact, it received two delisting warnings in eight months.
Additionally, the company’s financial reports show a steep drop in just about everything. Its full-year gross margin came in at negative 597%, revenue shrank from $49.72 million to $35.84 million, and net losses reached $214 million. With these numbers, the chances of a substantial recovery are getting closer to zero.
A troubled history from its founder, issues with product safety, and the potential delisting don’t look good on paper. Thus, investors might want to look elsewhere for their next EV stock investment.
On the date of publication, Rick Orford did not have (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.
