Shares of Fisker, an electric-vehicle start-up, are experiencing another downgrade from Wall Street, signaling a wider trend of analysts losing confidence in unprofitable EV companies.
Downgrade and Challenges
On Monday, Evercore ISI analyst Chris McNally downgraded Fisker stock from Buy to Hold. Additionally, he reduced the price target from $6 per share to $2. McNally expressed his concern over the company’s recent production guidance cut, which revised the projected units for 2023 from 13,000-17,000 to only 10,000.
This downgrade is not an isolated incident for Fisker. Over the past few weeks, the stock has been downgraded four times by analysts following guidance cuts, the departure of two chief accounting officers, and the disclosure of material weaknesses in the company’s accounting controls.
Analyst Sentiment and Future Outlook
Currently, approximately 23% of analysts covering Fisker recommend a Buy rating, while 38% have given it a Sell rating. In comparison, in October, 42% of analysts had Buy ratings and 25% had Sell ratings. The average Buy-rating ratio for stocks in the S&P 500 stands at around 55%.
The average analyst price target for Fisker stock has fallen from approximately $8 in October to $4.55, according to FactSet data.
As of early Monday trading, Fisker stock experienced a nearly 5% decline, reaching $1.64 per share. In contrast, the S&P 500 and Nasdaq Composite were down 0.7% and 1.1%, respectively.
Differing Views
R.F. Lafferty analyst Jaime Perez maintained his Buy rating on Fisker stock but lowered the price target to $3 from $7. Perez remains optimistic and projects positive earnings before interest, taxes, depreciation, and amortization (EBITDA) of $103 million for 2024. In contrast, the Wall Street consensus compiled by FactSet predicts an EBITDA loss of approximately $140 million.
The declining sentiment towards Fisker on Wall Street is mirrored by other EV start-ups struggling to achieve profitability.
Lucid Group’s Analyst Ratings Decline
Out of the 15 analysts covering Lucid Group, only one has a Buy rating. This marks a notable decrease compared to October, when five analysts recommended a Buy, and even further than a year ago, when four out of 10 analysts held the same view.
Polestar Automotive Analyst Ratings
Currently, 33% of analysts covering Polestar Automotive rate its shares as a Buy. This represents a decline from October, when 56% of analysts recommended a Buy rating. It is worth noting that a year ago, only three analysts provided coverage for the company. However, Polestar’s coverage has expanded over the past year, with nine analysts now covering its shares.
Chinese EV Stocks
Both NIO and XPeng have experienced a decrease in Buy ratings over the past 12 months. On the other hand, Li Auto has been an exception, as approximately 90% of analysts still recommend a Buy rating. It is noteworthy that Li Auto has been shipping around 40,000 electric vehicles per month and has become profitable.
Rivian Automotive’s Analyst Ratings
Rivian Automotive stands out among money-losing EV start-ups, with about 68% of analysts rating its shares as a Buy. This percentage remains similar to October’s rating. One year ago, 62% of analysts endorsed a Buy rating for Rivian. However, despite positive analyst sentiment, Rivian’s stock has declined by approximately 43% over the past year.
Focus on Profits for EV Start-ups
For investors, the key takeaway from these trends is clear. With rising interest rates and a slower economy, profitability becomes paramount. Higher interest rates result in more expensive financing for start-ups, making it harder to secure capital compared to when rates were near zero percent.
Collectively, Fisker, Rivian, Lucid, Polestar, NIO, and XPeng have utilized a combined total of $41 billion throughout their histories. However, without imminent profits, it is unlikely that such a substantial amount will be readily available.
As of now, the combined market capitalization of these six EV start-ups stands at approximately $57 billion. Significantly, Rivian, XPeng, and NIO account for about 75% of this market capitalization.
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