Despite soaring demand, the auto industry faces challenges, such as high inflation, semiconductor chip shortage, and supply-chain disruptions. Moreover, the high cost of charging EVs and a lack of charging infrastructure have been marring the industry’s growth. Therefore, we think investors should steer clear of Lucid Group (LCID) and Fisker (FSR), which possess poor fundamentals. Let’s discuss.
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Automobile production continues to be hampered by significant challenges, such as high inflation, semiconductor chip shortage, and persisting supply chain disruptions. The persistent shortage of semiconductors and critical raw materials has made it challenging to meet the rising demand.
Recently, Honda Motor Company Limited (HMC) announced that it would reduce car output by up to 40% at two Japanese plants for the rest of September due to ongoing supply chain and logistical issues.
Moreover, the increased cost of charging an electric car and a lack of charging infrastructure have led to slowing consumer demand. According to research by RAC, the cost to charge an electric car on a pay-as-you-go basis at a publicly accessible rapid charger has increased by 42% since May.
Given the challenges faced by the industry and the uncertain market conditions, it could be wise to avoid fundamentally weak auto stocks Lucid Group, Inc. (LCID) and Fisker Inc. (FSR).
Lucid Group, Inc. (LCID)
LCID uses its equipment and factory to design, develop, manufacture and sell electric vehicles, EV powertrains, and battery systems in-house.
For the fiscal second quarter ended June 30, 2022, LCID’s loss from operations widened 124.6% year-over-year to $559.20 million. Its total costs and expenses increased 163.6% year-over-year to $656.53 million. The company’s net loss and net loss per share narrowed 15.8% and 95.4% year-over-year to $220.42 million and $0.33, respectively. Also, its adjusted EBITDA loss came in at $414.08 million, up 89.9% from the prior-year value.
Analysts expect the company’s EPS to remain negative in fiscal 2022. The stock has slumped 63% year-to-date to close the last trading session at $14.06.
LCID’s weak fundamentals are reflected in its POWR Ratings. It has an overall F rating, equating to a Strong Sell in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
It has an F grade for Value, Stability, and Quality and a D for Sentiment. Within the D-rated Auto & Vehicle Manufacturers industry, it is ranked #58 of 64 stocks. Click here to see the other ratings of LCID for Growth and Momentum.
Fisker Inc. (FSR)
FSR focuses on designing, developing, manufacturing, and selling electric vehicles through White Space, Value, and Conservative premium segments. The company is also building a technology-enabled, asset-light automotive business model for the automotive industry.
FSR’s revenue decreased 63% from the year-ago value to $10K in the second quarter that ended June 30, 2022. Its total cost and expenses increased 66.8% year-over-year to $88.68 million. The company’s non-GAAP loss from operations widened 71.8% year-over-year to $87.48 million. Also, its net loss came in at $105.98 million, widening 129.3% from the year-ago period. In addition, its net loss per share also widened 125% year-over-year to $0.36.
Street expects the company’s EPS to remain negative in fiscal 2022. Its revenue for the third quarter ending September 30, 2022, is expected to decline 88.9% year-over-year to $1,670. Shares of FSR have declined 49.6% year-to-date to close the last trading session at $7.93.
FSR’s POWR Ratings reflect this bleak outlook. It has an overall F rating, equating to a Strong Sell in our proprietary rating system.
It has an F grade for Value, Stability, and Quality and a D for Growth and Sentiment. In the same industry, it is ranked last. Click here to see FSR’s rating for Momentum.
LCID shares were trading at $15.01 per share on Tuesday morning, up $0.95 (+6.76%). Year-to-date, LCID has declined -60.55%, versus a -21.33% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta’s profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
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