Last year, it was reported that more than 500 EV models are available globally. Competition has intensified and I expect several EV companies to go bust in the coming years. Among listed names, there are several high-risk EV stocks to sell before they head lower.
I must emphasize here that the discussion is based on the fundamental outlook. These EV companies are not worth holding in the long-term portfolio. However, there will be speculative opportunities where these high-risk EV stocks will have intermediate rallies. The trend is likely to remain on the downside.
Let’s discuss these EV stocks to sell with the negative fundamental catalysts.
Lucid Group (LCID)
I must admit that I had a positive view on Lucid Group (NASDAQ:LCID) with the company’s focus on innovation being the key factor.
However, as competition intensifies in the EV industry, there are multiple concerns that have cropped-up. Even after a decline of 67.33% in the last 12 months, LCID stock has a short interest that’s nearly 20% of the free float. This is an indication of the market sentiment for the stock.
Lucid recently raised $3 billion from an offering of common stock. With the company planning global expansion and investment in new models, cash burn is likely to accelerate.
The concern is that deliveries growth has remained slow and it’s not until 2026 or 2027 that Lucid will turn free cash flow positive. This is therefore not the last of equity dilution.
Of course, there will be trading opportunities in the form of a short-squeeze rally. I would however refrain from holding LCID stock in my core portfolio.
Arrival (ARVL)
When Arrival (NASDAQ:ARVL) stock listed through the SPAC merger, there were hopes of an interesting story developing. The company talked about low-cost micro-factories that could be rapidly scalable. Additionally, these micro-factories could deliver tailor made EV solutions for clients in the commercial EV sector.
However, Arrival has disappointed investors with continued cash burn and delays. ARVL stock has been battered and has regained NASDAQ listing compliance with a reverse stock-split.
Currently, Arrival is planning the production of it’s van by 2024. Earlier, the company was working on the Arrival bus and Arrival car. The narrowed focus will help in cost cutting. However, with micro-factories, the business scalability remains a concern.
As of Q1 2023, Arrival reported $130 million in cash. The company will also benefit from the proposed business combination with Kensington Capital. This will help in infusing $283 million in cash. However, I see prospects of further equity dilution if the business must survive. The outlook for ARVL stock therefore remains bearish.
Electrameccanica Vehicles (SOLO)
Electrameccanica Vehicles (NASDAQ:SOLO) has disappointed investors with a downside of 64% in the last 12 months. The stock remains among the top EV stocks to sell with business developments remaining pessimistic.
Electrameccanica came to the markets with a unique offering of a single-seater EV. Further, a base selling price of $18,500 was the differentiating factor. The SOLO car has however failed to attract consumers. Electrameccanica has also markets its car as a potential delivery van, but there has been no positive outcome on that front either.
The Q1 2023 report indicates that the management is looking to dilute equity to fund operations over the next 12 months. With sluggish vehicle deliveries and cash burn, raising funds is going to be challenging. I therefore believe that SOLO stock will continue to trend lower.
One potential positive catalyst is the anticipated launch of E4. The company expects to be profitable on the launch of this passenger vehicle EV. It however remains to be seen if the EV can gain market share in a highly competitive environment.
On the date of publication, Faisal Humayun 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.
