It’s no easy feat to be an electric vehicle (EV) start-up in today’s competitive landscape. With increased competition and high interest rates, many companies are experiencing a decline in stock prices. Unfortunately, Polestar Automotive, a prominent EV start-up, has recently encountered yet another setback.
Bernstein analyst Daniel Roeska recently initiated coverage of Polestar Automotive, giving it a less-than-ideal Sell rating. Roeska set a price target of $1.15 per share, a rather discouraging forecast for potential investors.
Despite acknowledging the appeal of Polestar’s cars, which are essentially higher-end Volvos, Roeska remains skeptical about the company’s future prospects. One positive aspect he highlights is the asset-light strategy employed by Polestar – the company does not own its own manufacturing plants. However, Roeska predicts challenging times ahead for Polestar.
According to the analyst, Polestar is “on a road to nowhere.” He predicts that the company will fall short of its 2025 targets, burn through 25% more cash than anticipated, and consequently require additional funding. Roeska’s estimates suggest that Polestar will utilize approximately $2.4 billion in cash over the next two years alone, surpassing the company’s previous projection of $1.9 billion for 2024 and 2025.
One contributing factor to this higher cash burn projection is the anticipated decline in sales. While Polestar estimates selling approximately 160,000 units by 2025, Roeska’s projections indicate a more modest figure of around 137,000 units.
In terms of recent performance, Polestar delivered around 54,600 vehicles in 2023 – an increase of approximately 6% from the previous year (2022).
Overall, it’s evident that Polestar Automotive faces significant challenges on its journey towards success. As the company’s financial struggles and ambitious targets come into focus, it remains to be seen how Polestar will navigate these obstacles and secure its position in the competitive EV industry.
Polestar’s Future: A Possible Return to Volvo Cars
Polestar, the premium electric vehicle (EV) brand established in 2017 by Geely and Volvo Cars, may eventually merge back into the Volvo Cars-Geely ecosystem, according to Roeska, a market analyst.
Despite the bearish call, Polestar stock saw a mere 0.5% decline in premarket trading, while S&P 500 and Nasdaq Composite futures experienced increases of 0.4% and 0.7% respectively.
However, Polestar shares have faced significant losses recently. Over the last year, the stock has plummeted around 63%. With each share currently priced at $2.10, this represents an approximate 85% decrease from its record high of around $14 per share achieved in 2021.
Post the latest rating, approximately 22% of analysts covering the stock have labeled it as a Sell. In contrast, the average Sell-rating ratio for stocks in the S&P 500 stands at about 7%. On the other hand, around 44% of analysts support the Buy-rating for Polestar shares.
The average analyst price target for Polestar shares sits at $4.25 per share. Notably, Roeska’s target price of $1.15 is now currently the lowest on the market, according to FactSet data.
Despite its current uncertainties, the polestar brand still holds potential for growth.
