Has the ongoing social-media frenzy gained precedence over fundamental strength of a company in deciding its fate? Well, so it seems and that’s how the meme-mania plays out. With one stock or the other grabbing the attention of investors who are active on the social-media platform, Reddit-fueled meme madness continues. One of the stocks that is being regularly featured among the top 10 most discussed stocks on the Reddit forum lately is electric vehicle (EV) player, Workhorse WKHS. Importantly, the stock topped the subreddit WallStreetBets mentions yesterday.
Workhorse Not Worth Your Money
Riding solely on the retail trading frenzy, with no news catalyst or underlying fundamental strength, shares of Workhorse have soared more than 66% over the past month. Currently carrying a high short interest — as a percentage of float — of around 36%, Workhorse has caught the attention of the day traders who are targeting the stock for a short squeeze.
While the company may offer short-term return potential to Reddit traders, Workhorse is not for rational long-term investors. Given the stock’s stretched valuation metrics (EV/EBITDA being 291.85X versus the industry average of 10.72X), elevated leverage, soaring operating costs, intense competition and disrupted production schedules amid chip crunch dim Workhorse’s prospects. Loss of the U.S. Postal Service contract has further deteriorated the stock’s outlook.
Amid the meme craze, the stock is having a terrific run on the bourses of late but how long can the uptrend continue in the absence of fundamentals? When excitement surrounding the stock will cool down, a freefall in the share price is bound to happen, with investors losing money overnight. So, if you are a rational investor, don’t get tempted to buy Workhorse because its high trading volumes and valuations defy logic. Workhorse currently carries a Zacks Rank #4 (Sell).
EVs are the Present and Future
The e-mobility revolution is expected to continue in 2021 and beyond, more so as President Biden has committed to spend a staggering $174 billion to lift the EV market. With EVs getting mainstream with each passing day, various automakers are investing a vast sum of money in e-mobility. Per Deloitte projections, worldwide EV sales are set to see a CAGR of 29% over the next decade. The Boston Consulting Group projects EVs to more or less account for a third of the global auto industry by 2025 and more than 50% by 2030, indicating a massive jump from 2.6% in 2019.
Picking the Right Way
Meme craze can cause share price volatility in the short run and benefit traders; however, long-term investors should not give in to this hype. It’s wise to ignore the buzz surrounding such meme stocks and bet on fundamentally strong companies in the space to enjoy safe gains. Below we have highlighted three stocks for you if you wish to ride the EV wave. These stocks have a favorable Zacks Rank and strong Style Score. Our research shows that stocks with a VGM Score of A or B combined with a Zacks Rank #1 (Strong Buy) or 2 (Buy) or 3 (Hold) offer the best investment opportunities.
Play the EV Euphoria With These Legacy Auto Stocks
General Motors GM: General Motors’ “all-in” electrification strategy to gain a competitive edge in batteries, software, vehicle integration, manufacturing and customer experience will make EVs the key catalyst for boosting profitability. The firm’s ramped up investment (around $35 billion through 2025) in electric and driverless cars, proprietary Ultium battery technology as well as ambitious EV sales targets bode well for the stock. Its current EV/EBITDA ratio stands at 7.38, way lower than the industry’s 31.76. The Zacks Consensus Estimate for 2021 and 2022 earnings implies year-over-year growth of 24.9% and 15.6%, respectively. The company — currently sporting a Zacks Rank #1 and VGM Score of A — has a long-term expected EPS growth rate of 9.9%. So, if you want to capitalize on the EV revolution, General Motors might just be the best stock to place your bets on. You can see the complete list of today’s Zacks #1 Rank stocks here.
Ford F: General Motors’ closest peer Ford has committed to spend more than $30 billion in the development of EVs through 2025. The Detroit auto giant broke ground on its $1-billion Ford Cologne Electrification Center in Germany. It has also established a battery center to accelerate the research and development of battery technology for revving up its EV capabilities. The impending acquisition of Electriphi, Ford Spin’s launch of new e-bike and Ford Lincoln’s goal to go all-electric by 2030 further demonstrate the EV prowess of the auto biggie. Its current EV/EBITDA ratio stands at 18.95, way lower than the industry’s 31.76. The Zacks Consensus Estimate for 2021 and 2022 earnings implies year-over-year growth of 158.4% and 57.4%, respectively. Ford — currently carrying a Zacks Rank #3 and VGM Score of A — has a long-term expected EPS growth rate of 21.8%.
Volkswagen VWAGY: Volkswagen has been the largest investor in EV technology out of all the global automakers, with $41 billion allocated just toward eco-friendly cars. Per the company’s five-year plan unveiled in November 2020, the Germany-based auto giant intends to spend $86 billion in e-mobility, hybrid technology and digitization through 2025. Green vehicles are set to account for 20% of its total sales by 2025. The firm targets 1 million EV sales this year and plans to launch 70 EVs by 2030. Volkswagen recently stated its intention to phase out the sale of internal combustion engine vehicles in Europe by 2035 and aims to make its entire fleet carbon neutral by 2050. The company’s current EV/EBITDA ratio stands at 2.22, way lower than the industry’s 9.41. The Zacks Consensus Estimate for 2021 and 2022 earnings implies year-over-year growth of 70.2% and 7.5%, respectively. Volkswagen — currently carrying a Zacks Rank #3 and a VGM Score of A — has a long-term expected EPS growth rate of 12%.
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Ford Motor Company (F) : Free Stock Analysis Report
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Workhorse Group, Inc. (WKHS) : Free Stock Analysis Report
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Zacks Investment Research
June 29, 2021 at 07:29PM
https://finance.yahoo.com/news/forget-wkhs-tap-3-non-122912883.html
Forget WKHS, Tap These 3 Non-Meme Stocks to Play the EV Boom - Yahoo Finance
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