Why electric vehicle stocks are going upside down

It’s been a tough road lately for Tesla and other young electric vehicle maker stocks.

Electric vehicle makers plunged on Thursday after Tesla’s earnings report as investors focus on growing competition and the impact of supply chain disruptions.

from Tesla (TSLA) Shares fell more than 11% on Thursday after the car and battery maker reported fourth quarter results. Its shares were down 17% last week and 21% in January.

Morningstar analyst Seth Goldstein says the pressure on Tesla shares doesn’t just reflect the latest earnings report, which he called “strong.”

“I think it’s the market realizing that traditional automakers can and will make electric vehicles,” he says. “Startup valuations seem to assume that many of them would be 100% successful in cost-effectively developing a product prototype, when many of these companies had never been successful in mass manufacturing a vehicle before.”

Goldstein pegs Tesla’s fair value at $700, leaving the stock 18% overvalued.

You’re here CEO Elon Musk said on the earnings call that there are no plans to unveil any new vehicles in 2022delaying the Cybertruck due to supply chain constraints.

“The delay will prevent Tesla from being a frontrunner in the light-duty electric truck market,” Goldstein said. “Instead, the Cybertruck will immediately face competition from traditional automakers such as Ford. (F) and new entrants like Rivian (RIVN). As such, the Cybertruck could see its initial sales slow, which would weigh on market sentiment.”

Tesla’s slide is at the forefront of the collapse of several EV-play stocks over the past year.

A number of EV-focused companies, such as Rivian and Chinese NIO companies (NIO) and Xpeng (XPEV) rode the wave with Tesla’s rally last fall. Those gains have since been wiped out.

Rivian was particularly affected. The truck maker saw its shares jump 70% after its IPO in November. Since then, they have fallen 41% from their IPO price. Over the past 12 months, NIO has plunged 62.3% and Xpeng is down 30.9%.

Lordstown Engines (STROLL), a publicly listed start-up SPAC specializing in electric pickup trucks, is one of the worst-performing electric vehicle stocks in the market. The shares are down 28% this month and 90% last year. Lordstown struggled to start production due to lack of cash.

“For a long time, Tesla enjoyed being the only company to make a good BEV [battery electric vehicle], but that’s no longer true, and it will make life difficult for startups like Rivian (of which Ford owns more than 12%) in my opinion,” says Dave Whiston, Morningstar equity strategist for US autos. over a decade ago there’s been a lot of easy money for people like Tesla or new entrants but with the fear of rising interest rates that easy money won’t be as easy and could even dry up completely in the event of a recession. Tesla has enough money at this point to survive, but other new entrants might not.”

Unlike new electric vehicle companies, traditional automakers are on the rise. Ford has soared 81% in the past 12 months and said it will produce an electric version of the F-150 that will rival the Cybertruck. As Tesla faces delays, Ford is planning a increase in production to quickly move into the electric pickup truck market.

Toyota (TM)volkswagen (VWAPY)and General Motors (GM) all plan to expand into the electric vehicle market. Shares of Toyota and Volkswagen are up more than 30% in the past 12 months, outperforming Tesla.

“A few years ago, the market seemed worried about the tens of billions of dollars needed to transition a legacy automaker to electric vehicles, but a year ago, after the CES keynote from Mary Barra, CEO of GM, the sentiment seemed to change to be the more you spend, the better,” Whiston says. “Soon after that speech, GM announced its ambition for its global vehicle lineup to be 100% zero by 2035. I think the market has finally realized that GM hasn’t been kidding for over 4 years with its various electric vehicle announcements.”

A significant change in the landscape concerns the types of electric vehicles that traditional automakers produce.

“There are Cadillac offerings starting in a few months with the Lyriq crossover, and they’re offering BEV pickups now and in the near future with the GMC Hummer, Chevrolet Silverado, GMC Sierra, and Ford’s F-150 Lightning.” , Whiston said. “Additionally, Ford put its iconic Mustang name on an electric vehicle over a year ago with the Mach-E. These are the largest and most profitable vehicles the two companies sell, especially pickup trucks. full size.”

Of the mainstream automakers, only General Motors and Volkswagen are undervalued at current prices. General Motors has 4 Morningstar Rating stars, while Volkswagen has 5 stars. Toyota and Ford are both considered fairly valued, rated at 3 stars.

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