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From time to time I realize that the current slowdown in the EV market can provide a strong buying opportunity for competitive investors. However, this sentiment doesn’t apply to all EV stocks. Not all EV corporations are created equal, and there are some huge differences that set them apart. Some EV stocks are worth avoiding. The only position you would need in those stocks is a short position, and even that can be risky, given the immense volatility of this space. You will almost lose coins by investing in those stocks, as those corporations bleed coins and dilute their shareholders to continue their unsustainable operations.
Now, I tend to have a maximum tolerance for risk. But there are exceptions, and all three of these companies have red flags that even the most intrepid investors pay attention to. Let’s take a look at three EV stocks we should avoid like the plague.
Lucid (NASDAQ:LCID) is a popular EV startup and it’s the one that gives me a smart opportunity. This startup is burning through money at an alarming rate, and the continued dilution has you on the verge of imagining long-term gains from owning those vehicles. Share.
These losses are staggering, amounting to $653. 8 million in the fourth quarter of 2023 and $2. 8 billion for the year. With about $4 billion in money remaining, time is running out for Lucid to ramp up production and break even sooner. strong enough for Lucid to exert its pricing power and generate sustainable margins. The long-term basics don’t look promising for Lucid investors, to say the least.
In short, Lucid is far from justifying a $7 billion valuation. Your business style faces immense challenges, ranging from tight demand to massive consumption of money, before it can plausibly thrive. with very worrisome finances and an unsustainable trajectory in the absence of primary changes. The company’s abundant money-burning point makes me wary of taking any long positions here. In fact, it’s one of the most sensible EV stocks to avoid, at least in my opinion. opinion.
If Lucid makes me think, Faraday Future (NASDAQ:FFIE) absolutely alarms me. This inventory has been incredibly dilutive, and even a miraculous resurgence in the most sensible of EV ratings would likely result in losses for existing investors, factoring in dilution. . I don’t really see a path to good luck for Faraday Future.
The company’s FF 91 flagship SUV is priced at around $309,000, which is only available to a small number of very wealthy people who care more about a car’s looks than its specs. Meanwhile, Tesla’s Model X (NASDAQ: TSLA) starts at around $80,000 with positive margins. It’s hard to believe in a significant demand for FF 91s at a price four times higher than comparable models on the market, coming from an unknown startup. It doesn’t seem like a scalable business model.
Unlike the two most sensible EV stocks to avoid, Hyliion (NYSE:HYLN) looks promising. Unfortunately, that’s not enough of a promise to propose buying this title.
Hyliion has recently reduced its spending of money and losses, which are expected to increase in 2024, but analysts expect losses to nearly triple in 2025, indicating a volatile monetary scenario ahead.
My considerations arise from the fact that Hyliion is abandoning its main generation of electric propulsion systems in favor of a select fuel production company. This belated strategic shift likely resulted in a significant waste of capital on what was supposed to be the company’s number one competitive advantage. , Hyliion necessarily has to start over in a new vertical.
Although the control temporarily learned that the past strategy was unsustainable, I wonder if the number two pivot will also gain traction. This immediate replacement, of course, doesn’t build trust, at least for me. And as losses continue to pile up in the short term as the company implements its costly transition, Hyliion will have to scramble to survive, before it even thinks about thriving.
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At the time of publication, Omor Ibne Ehsan did not hold (and did not hold) any position in the securities discussed in this article. The perspectives expressed in this article are those of the author, subject to the publication guidelines of InvestorPlace. com.
Omor Ibne Ehsan works at InvestorPlace. Es a self-taught investor who focuses on expansion and cyclical stocks that have strong fundamentals, prices, and long-term potential. He is also interested in high-risk, high-reward investments, such as cryptocurrencies. and penny stocks. You can follow him on LinkedIn.
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