Reeling Down the EV Highway
2023 marked a stormy climate for the electric vehicle (EV) industry. As market turbulence ramped up, demands dwindled, and government backing softened, EV companies found themselves battered. Throw in hasty spending maneuvers and plummeting revenues, and it’s a toxic brew that spells disaster.
Although some companies may still see growth on the horizon, the wise path may be to begin trimming the branches of the most beleaguered EV stocks in your portfolio. By shedding these vulnerable entities now, you can immunize yourself against the looming repercussions as the EV landscape darkens.
A Dismal Forecast for Fisker Inc. (FSR)
Creating ripples in the EV waters, Fisker Inc. (NYSE: FSR) specializes in designing and developing electric vehicles. With its innovative technology – the Fisker Flexible Platform Agnostic Design (FF-PAD) – the company can shape, produce, and adjust a vehicle into an EV platform of a specific dimension.
The unveiling of the Fisker Ocean in 2023, the company’s crossover SUV, drew a mixed reaction from the market. While some praised its construction and interior, criticisms surfaced concerning key fob glitches, software malfunctions, and absent features. The imminent releases of Fisker Alaska, Fisker Pear, and Fisker Ronin raise hopes for smoother sailing.
However, 2023 brought a torrent of production delays and unforeseen hurdles, significantly denting the company’s operational and financial health. The fourth quarter of 2023 witnessed a staggering 35% drop in gross margins, with EPS closing at a loss of $1.23. Disturbingly, this loss accounted for a worrisome 55% of the $2.22 annual EPS deficit. Moreover, the full-year cash and cash equivalents plummeted by 56% from $736.55 million to $325.45 million.
The NYSE issued a non-compliance warning to FSR due to its stock trading persistently below $1 for 30 consecutive trading days, hinting at imminent delisting. This string of setbacks has relegated Fisker Inc. from a promising EV contender to a company perched dangerously on the brink of insolvency.
In a bid to stabilize, FSR is pondering cost-cutting measures, facility reductions, and potential manpower downsizing. Talks about securing fresh capital from an existing noteholder are circulating, albeit unconfirmed, leaving investors in a somber state of uncertainty. Perhaps it’s wise for investors to divest FSR shares and seek more stable footing in the EV realm.
The Stark Plight of Faraday Future Intelligent Electric Inc. (FFIE)
Entering the scene with a grand vision, Faraday Future Intelligent Electric Inc. (NASDAQ: FFIE) finds itself in the eye of a storm. Investors who entered the fray last year now face the stark realization that the company’s flagship product, the FF91 Futurist Alliance luxury EV priced at $309,000, failed to deliver.
Unprecedentedly, FFIE’s stock price nosedived from $100 a year earlier to a meager $0.10, registering a rare -99.9% one-year downturn. Despite FFIE’s attempts to remain afloat and rectify Nasdaq’s non-compliance warning, the company underwent two stock splits within a brief six-month window – an ominous harbinger.
Pinching deeper, the financial picture appears bleaker. FFIE still grapples with revenue generation, with its recent quarterly report reflecting a mere $551,000 in auto sales – a figure less than the cost of two Futurist Alliance EV units. Competing with heavyweight industry titans in the luxury EV segment exacerbates the looming shadows cast over FFIE’s future.
While the company espouses operational enhancements and expansion strategies, it faces staggering losses and significant cash outflow. Investors clutching at hope might find solace in divesting FFIE shares in favor of more promising EV prospects.
The Rise and Fall of Nikola Corporation: A Cautionary Tale for Investors
Founder’s Fall From Grace
For Nikola Corporation (NASDAQ:NKLA), the path to prosperity was marred by a scandal of epic proportions. In 2022, founder and ex-CEO Trevor Milton faced the music as he was implicated in a web of fraud. Milton’s deceptive maneuvers, designed to artificially inflate share prices, cast a dark shadow over the company’s integrity. However, his departure marked a turning point for Nikola.
A New Chapter with Thomas Okray
Stepping into the void left by Milton, former GM executive Thomas Okray navigated the ship through tumultuous waters. A wave of changes swept through the company under Okray’s leadership, with a strategic reshuffling of the C-suite heralding a fresh beginning for Nikola. As the dust settled, investors braced for what lay ahead.
Trials and Tribulations
In a bid for redemption, Nikola Corporation staged a comeback in mid-2023, only to encounter fresh hurdles along the way. A stark setback came when the company faced the arduous task of recalling 209 electric semis plagued by a battery manufacturing defect. The resultant fires and financial damages painted a grim picture for Nikola, triggering a precipitous decline in its stock value.
Financial Maelstrom
The once-promising figures hauntingly morphed into a financial nightmare for Nikola. A glance at the ledgers revealed distressing numbers across the board. With a staggering full-year gross margin of negative 597%, a revenue contraction from $49.72 million to $35.84 million, and eye-watering net losses amounting to $214 million, the company found itself ensnared in a vortex of fiscal distress. The prospect of a substantial recovery began to dissipate.
A Closing Chapter?
As Nikola’s troubled past, safety blunders, and looming delisting threats cast a pall over its future, investors faced a stark reality. The allure of Nikola’s stock dimmed, prompting a cautious reevaluation of investment choices in the EV sector. The writing on the wall was clear: uncertainty lingered like a specter, urging stakeholders to tread carefully in their financial endeavors.
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.
