Stocks to sell

Luxembourg-based electric vehicle (EV) manufacturer Arrival (NASDAQ:ARVL) wants to make its mark in the U.S. clean-energy vehicle market. It won’t be easy, as Arrival’s competitors include automotive giants like Tesla (NASDAQ:TSLA) and Ford (NYSE:F). Plus, ARVL stock investors should be concerned about the possibility of a delisting from the Nasdaq exchange.

You may be familiar with Tesla’s huge gigafactories. Arrival differentiates itself with small, specialized plants called microfactories; you can view a video of the Arrival Microfactory here. Arrival’s strategy is to build electric delivery vans and buses with a smaller capital expenditure than a gigantic Tesla factory requires.

This might sound great in theory. However, in reality, Arrival’s problems are numerous, and prospective investors should explore other options before jumping into a hasty trade.

ARVL Stock Might Eventually Be Delisted

During the EV-hype phase of late 2020, ARVL stock traded above $30. Nowadays, however, the Arrival share price is between 30 cents and 40 cents.

Granted, something miraculous could happen this year. Meme-stock traders might target Arrival for a short squeeze, though hoping for this type of event isn’t a sensible investment strategy.

Arrival could enact a reverse share split, and it wouldn’t surprise me if the company eventually resorts to this tactic. Arrival has received a delisting warning from the Nasdaq exchange because ARVL stock traded below $1 for a prolonged period.

Even if Arrival implements a reverse share split, this would only be a temporary fix. It wouldn’t permanently solve Arrival’s deeper issues. Arrival acknowledged that, as of Sept. 30, 2022, the company “had existing cash and cash equivalents of approximately $330 million,” which was “not sufficient to cover twelve months of operations.”

It’s One Problem After Another for Arrival

We’ve already covered Arrival’s delisting threat and insufficient capital position. Those are two among many problems for Arrival.

Alarmingly, Arrival has admitted that “material uncertainties about going concern remain” for the company. Furthermore, Arrival plans to “reduce its global workforce by approximately 50%.” This is a drastic cost-cutting measure, and it’s hard to imagine that Arrival can successfully compete in the U.S. against the likes of Tesla and Ford.

It’s not difficult to find disconcerting news items about Arrival. Investors may recall the TechCrunch report that Arrival had reduced its EV “delivery plans from 400 vehicles to 20” last year. Then, in late 2022, the Financial Times reported that there was an “array of setbacks” concerning Arrival, including a “delay of several years to its first saleable van,” as well as “a recent vehicle fire witnessed by its largest customer.”

Finally, Arrival apparently seeks to focus on the U.S. EV market. That’s a mistake, as Arrival could easily run out of cash while trying to compete with much bigger automakers. Bear in mind, the company’s third-quarter 2022 business update revealed a widening net earnings loss. Arrival’s foray into the crowded U.S. market for EVs could easily put the company deeper into the red in 2023.

A Comeback Is Unlikely for ARVL Stock

It’s fine if you like Arrival’s microfactory concept. The company’s path from concept to execution to profitability is uncertain, though.

Now, Arrival wants to jump headfirst into the highly competitive American clean-energy vehicle market. This will probably be a costly mistake for Arrival. In the final analysis, a comeback is unlikely for ARVL stock as it will probably continue to lose value and might even end up getting delisted someday.

On the date of publication, David Moadel 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.

David Moadel has provided compelling content – and crossed the occasional line – on behalf of Motley Fool, Crush the Street, Market Realist, TalkMarkets, TipRanks, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.

Articles You May Like

Top Wall Street analysts like these dividend-paying stocks
Caligan picks up a stake in Verona Pharma, seeing an opportunity to generate more value
Behind the “Trump Bump”: How Much Could Stocks Rise in 2025?
Trump is the most pro-stock market president in history, Wharton’s Jeremy Siegel says
David Einhorn to speak as the priciest market in decades gets even pricier postelection