Dump These 3 Dimming EV Stocks Before It’s Too Late

Faisal Humayun

Sun, May 12, 2024, 5:20 AM 4 min read

When high-flying stocks plunge by 50% or more, there is always a temptation to consider exposure at oversold levels. There are cases of a strong rally after a big sell-off on the back of a short-squeeze or improvement in company fundamentals. However, it’s not necessarily true in all cases of big corrections. This overview is important, as I discuss EV stocks to sell in this column.

With factors of competition, macroeconomic headwinds, cash burn and slow EV adoption, several EV stocks have plunged. While some stocks will recover and emerge stronger, others will continue to collapse. It’s a time when the markets separate the winners from the losers in the industry.

The EV stocks to sell discussed below represent companies that attracted investors initially. However, these companies have failed to impress in terms of growth, and with sustained cash burn, fundamentals are significantly weak. I, therefore, don’t see hopes of reversal in these stories.

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Lucid Group (LCID)

Lucid Air Touring sedan display at the Service Center. Lucid Motors (LCID) is a manufacturer of luxury EV Electric Vehicles.

Source: Jonathan Weiss / Shutterstock.com

Lucid Group (NASDAQ:LCID) stock listed just before the euphoric rally for growth and meme stocks in the first quarter of 2021. Throughout the year, Lucid was being talked about as the Tesla (NASDAQ:TSLA) killer. However, the rally fizzled out in December 2021, and LCID stock has been in a gradual downtrend in the last 2.5 years.

I must add that the markets have rightly punished LCID stock, with the company’s performance being significantly divergent from initial growth estimates. Lucid Group continues to struggle when it comes to boosting deliveries growth. Intense competition and macroeconomic headwinds have accelerated the downfall of the company.

While deliveries have been sluggish, cash burn has remained significant. The company has continued to dilute equity, contributing to the stock plunge. However, there seems to be no visibility of positive results at the operating level in the coming quarters. As a matter of fact, it’s unlikely Lucid will turn cash flow positive before 2026 or 2027. Of course, that’s if the company can survive the next few years.

ChargePoint Holdings (CHPT)

A close-up of an orange ChargePoint (CHPT) station.

Source: JL IMAGES / Shutterstock.com

Among EV charging stocks, ChargePoint Holdings (NYSE:CHPT) looks weak even after plunging over 80% in the last 12 months. With poor financial performance, I don’t see CHPT stock recovering even from a trading perspective. On the contrary, the meltdown is likely to continue.

For Q4 2024, ChargePoint reported revenue of $115.8 million. That was lower by 24% on a year-on-year basis. Given the growth potential in the U.S. and Europe, the revenue trend is alarming and a key reason to avoid the stock.

It’s also worth noting that for Q1 2025, the company has guided for revenue of $105 million. On a year-on-year basis, revenue will likely be lower by 19%. Therefore, the downtrend in revenue will probably sustain.

Another alarming point is that ChargePoint reported an operating loss of $92 million for Q4 2024. On a year-on-year basis, operating losses widened. Therefore, the decline in revenue coupled with the widening of losses is a perfect recipe for disaster for the company.

Polestar Automotive (PSNY)

PSNY stock: Polestar EV store. Electric car and Chinese customer in store. Polestar is a Swedish automotive brand owned by Volvo Cars and Geely (GGPI)

Source: Robert Way / Shutterstock.com

Polestar Automotive (NASDAQ:PSNY) is another EV stock that has been struggling since listing in June 2022. From listing highs of $13, PSNY stock has plunged to current levels of $1.34.

It’s worth noting that in February 2024, Polestar raised $950 million in debt financing from a consortium of banks. The financing serves as a lifeline for the company.

However, it remains to be seen if Polestar can boost deliveries and reduce costs in the coming quarters. The company has guided for a cash flow break-even in 2025. I would take this estimate with a pinch of salt with the current slowdown in EV sales.

In terms of positives, PSNY has Polestar 5 due for launch this year. Additionally, the company is targeting the launch of Polestar 6 in 2026. With an expanding sales network, there is a case for upside in deliveries. It remains to be seen if it’s enough to deliver positive cash flows at the company level. Considering the competition and cash burn factor, I remain skeptical.

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.

Faisal Humayun is a senior research analyst with 12 years of industry experience in the field of credit research, equity research and financial modeling. Faisal has authored over 1,500 stock specific articles with focus on the technology, energy and commodities sector.