In March, a CNBC article suggested that the electric vehicle (EV) euphoria is dead. The piece reported facts that indicated that many automotive majors are scaling back their EV plans. I completed agree with the point that the euphoria is dead. However, it’s equally important to understand that the industry is not dead. EV adoption might not have been as expected, but the trend is likely to be towards higher EV sales in the coming years.
Nevertheless, intense competition remains in the industry, and not all EV companies will survive. There will be failures and industry consolidation in the next few years. The companies that survive will emerge stronger. However, let’s explore the EV stocks to sell that represent fundamentally weak companies.
In my view, these EV companies will continue to struggle while the stock is likely to trend lower. Let’s discuss the reasons to be bearish.
Lucid Group (LCID)
Source: Khosro / Shutterstock.com
Lucid Group (NASDAQ:LCID) stock has plunged by almost 65% in the last 12 months. Even after a big correction, the struggling EV company looks unattractive. I would not be surprised if LCID stock declines by another 30% to 50% in the next 12 to 18 months.
A major concern is that Lucid Group is not anywhere close to an inflection point from the perspective of production and deliveries growth. For the full year, the EV maker has guided for production of 9,000 cars. Amidst intense competition, it’s unlikely that deliveries growth will surge anytime soon.
The second major concern is cash burn. For Q1 of 2024, Lucid reported operating loss of $730 million. Annual losses are likely to be in the range of $2.5 to $3 billion. While Lucid Group has a strong cash buffer of $5 billion, I expect further dilution of equity in 2025. This is likely to translate into a steep correction.
Therefore, even with the impending launch of Lucid Gravity SUV, the outlook is challenging. I would avoid LCID stock with several better investment options among EV companies.
ChargePoint Holdings (CHPT)
Source: Michael Vi / Shutterstock.com
ChargePoint Holdings (NYSE:CHPT) is an EV charging infrastructure company that has been struggling with growth and profitability. It’s not surprising that CHPT stock has witnessed a meltdown of 83% in the last 12 months. Further, the deep correction doesn’t make CHPT attractive. I expect further wealth erosion as business fundamentals continue to weaken.
A big worry for ChargePoint Holdings is growth deceleration. For Q1 of 2025, the company reported a year-over-year (YOY) decline in revenue of 18% to $107 million. Given the scope for penetration of EV charging infrastructure, revenue de-growth makes the stock unattractive.
Importantly, growth deceleration has not been associated with a proportionate decline in loss from operations. As a matter of fact, operating loss as a percentage of revenue has widened in Q1 of 2025 YOY.
A combination of revenue decline coupled with significant cash burn makes CHPT stock an avoid. There are better emerging players in the industry like Blink Charging (NASDAQ:BLNK).
Polestar Automotive (PSNY)
Source: Robert Way / Shutterstock.com
Polestar Automotive (NASDAQ:PSNY) continues to disappoint investors. PSNY stock has sharply corrected by 60% year-to-date (YTD). I don’t see any catalyst that can trigger a sharp reversal in the stock.
Recently, Polestar Automotive published full-year 2023 results and revenue declined by 3% YOY to $2.4 billion. However, the EV company reported adjusted operating loss of $1.5 billion, which was higher by 59% YOY. A decline in revenue and higher losses are red flags.
Back in February, Polestar Automotive received $950 million in external funding that was provided by 12 banks. However, the cash infusion is unlikely to be enough. Also, Polestar Automotive has guided for cash flow break-even in 2025. In my view, that’s unlikely considering the current rate of cash burn and macroeconomic headwinds.
For now, it’s a fight for survival and significant dilution of equity might be in the cards as PSNY stock trades at 90 cents.
On Penny Stocks and Low-Volume Stocks: With only the rarest exceptions, InvestorPlace does not publish commentary about companies that have a market cap of less than $100 million or trade less than 100,000 shares each day. That’s because these “penny stocks” are frequently the playground for scam artists and market manipulators. If we ever do publish commentary on a low-volume stock that may be affected by our commentary, we demand that InvestorPlace.com’s writers disclose this fact and warn readers of the risks.
Read More: Penny Stocks — How to Profit Without Getting Scammed
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.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
