September’s 7 Most Controversial EV Stocks: Buy or Bail?

Stock Market

The electric vehicle market is set to accelerate. In fact, according to iShares, global EV sales could soar to about 27 million by 2026 from 10.5 million just last year. While that’s great news for most electric vehicle stocks on the market, we must also consider that some may not survive their competitive threats. That being said, I wanted to dig into seven of the top controversial EV stocks for an idea of which ones investors should buy or bail on immediately.

Controversial EV Stocks: Blink Charging (BLNK)

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Blink Charging (NASDAQ:BLNK) manufactures, owns, and operates EV charging stations. Although it was founded back in 1998, Blink is way behind two of its larger rivals —ChargePoint (NYSE:CHPT) and EVgo (NASDAQ:EVGO) — when it comes to generating revenue.

Last quarter, for example, Blink’s top line came in at $32.8 million, while EVgo generated sales of $50.6 million and ChargePoint reported $150.5 million of revenue. Another red flag was the recent sale of 78,000 shares of BLNK stock earlier this month by former Blink CEO Michael Farkas. While Farkas still retained over 2.7 million shares of BLNK stock, his decision to unload 78,000 shares is not a positive sign for the company or its shares.

Xpeng (XPEV)

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Chinese EV maker Xpeng (NYSE:XPEV) just entered into an extensive alliance with the giant European automaker Volkswagen (OTCMKTS:VWAGY) and continues to report encouraging news.

For one, the company said it would expand to multiple, large countries in Europe, including Germany, Britain, and France, in 2024. Two, its autonomous technology, which can reportedly allow EVs to function as robo-taxis, could very well make a huge splash in Europe.

In addition, Xpeng’s alliance with Chinese ride-hailing company Didi (OTCMKTS:DIDIY) could produce a hugely profitable robo-taxi business in China, where robo-taxis have already proliferated quite widely. The forward price-sales ratio of XPEV stock is less than two times, which is quite low given its very strong prospects. XPEV is a definite buy.

Controversial EV Stocks: Tesla (TSLA)

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If Tesla (NASDAQ:TSLA) can ramp up its Cybertruck and Tesla Semi sales, its top and bottom lines could soar. And Morgan Stanley may wind up being correct about the automaker’s ability to profit tremendously from developing its own computer chips using its supercomputer.

But given the disparity between Elon Musk’s past promises and Tesla’s results, I’m not sure yet if the automaker will be able to execute most or even any of these goals. Also, with TSLA stock changing hands for 72.85 times its trailing profits and 9.5 times its trailing sales, I believe that much of these hypothetical achievements are already reflected in the price of TSLA stock.

Therefore, I view TSLA stock as a “bail” at this point.

Rivian (RIVN)

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Like Xpeng, Rivian (NASDAQ:RIVN) continues to steadily make progress toward becoming a highly profitable, thriving EV maker.

Helping, Morgan Stanley says CEO RJ Scaringe expects the company’s gross margin to climb going forward. The firm also noted that its backlog of orders extends until the end of next year, which indicates strong demand. In addition, the facility the automaker is currently building in Georgia should further boost its top line by enabling it to deliver more EVs. I also believe Rivian’s market capitalization of $20.4 billion greatly undervalues its long-term potential, making RIVN stock a clear buy.

Fisker (FSR)

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Earlier this month, Seeking Alpha reported that Magna (NYSE:MGA), which is a manufacturing partner of Fisker (NYSE:FSR), had produced 3,123 EVs for Fisker. Meanwhile, only 775 of those EVs had been delivered, although another 1,500 EVs were being sent to the U.S. from Europe.

Given Magna’s size, I believe that it has little constraint on its production capacity. Therefore, the fact that it has only produced slightly over 3,000 EVs for Fisker at this point, 10 months after it started producing EVs for FSR, indicates that the demand for Fisker’s vehicles is not very strong.

Despite its apparent difficulties generating significant demand for its EVs, Fisker’s market capitalization is a rather high $2 billion, making it a “bail” at this point.

Lucid (LCID)

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For the second quarter, Lucid (NASDAQ:LCID) reported revenue of roughly $151 million, coming in $54 million below analysts’ average estimate. Moreover, its top line grew little versus the previous quarter. That’s unusual and constitutes a problem for the automaker because usually Q2 is seasonally stronger than Q1, Seeking Alpha contributor Dair Sansyzbayev noted.

Meanwhile, investment bank Baird on Sept. 7 issued a fairly negative note about LCID stock, praising the strong technology, efficiency and range of its EVs, but warning that the high price tag of its vehicles will make it difficult for LCID to sell many of them. I would add that Lucid is facing a tremendous amount of tough competition in the luxury EV space and that its brand recognition appears to still be fairly low.

I believe that Lucid’s current market capitalization of $11.8 billion is quite excessive given its relatively weak outlook, making it one of the controversial EV stocks on which to “bail.”

Li Auto

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Chinese hybrid electric vehicle maker Li Auto (NASDAQ:LI) continues to post impressive sales growth as the number of EVs that it delivered last month soared 664% versus August 2022 to 34,914. Also noteworthy is that it delivered 2.3% more vehicles in August than in July. Plus, its deliveries have increased every month since May. Since January, its monthly deliveries have more than doubled.

Clearly, its vehicles are resonating with Chinese consumers, and it is taking a significant amount of market share from its competitors. Additionally, last quarter its revenue soared 228% versus the same period a year earlier, and it generated earnings per share of 36 cents. Li’s forward price-earnings ratio is a reasonable 32.7x, making it a buy.

On the date of publication, Larry Ramer held long positions in XPEV, RIVN, and EVGO. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Larry Ramer has conducted research and written articles on U.S. stocks for 15 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been PLUG, XOM and solar stocks. You can reach him on Stocktwits at @larryramer.

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