Trouble at Tesla: 3 More EV Stocks to Sell Before They Short-Circuit

Stocks to sell

There are some EV stocks to sell for this April. Sometimes, it’s best to ditch companies that are underperformers, instead of hanging on for a chance to recover. The EV market has seen significant volatility in recent months, with many high-profile companies struggling to maintain momentum. Investors may want to consider selling off positions in EV startups or established automakers that have failed to keep pace with industry leaders.

Tesla (NASDAQ:TSLA) is one of those companies that has faced difficulties recently, and some other EV stocks have also followed suit. Tesla’s stock fell after it missed first-quarter delivery estimates, selling under 387,000 vehicles, marking a 20% decrease from the prior quarter and an 8.5% year-over-year drop, its first since early 2020. 

This shortfall from Wall Street’s expectation of 457,000 deliveries was described as an “unmitigated disaster” by analysts.

The three EV stocks to sell in this article show some troubling signs that they could repeat TSLA’s fiasco. So here are the companies to avoid.

ChargePoint (CHPT)

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Amidst a challenging year for ChargePoint (NYSE:CHPT), workforce reductions and infrastructure gaps have contributed to a significant stock price decline — the worst has yet to come for the company.

In fiscal year 2024, CHPT reported a revenue increase to $506.6 million, marking an 8% growth from the previous year. However, this period also saw challenges including a decrease in networked charging systems revenue by 1% to $360.8 million and a significant increase in net loss to $457.6 million from $345.1 million in the prior year.

The gross margin dropped to 6% from 18% due to various factors, including restructuring costs. Looking ahead, CHPT anticipates revenue between $100 million and $110 million for Q1 fiscal 2025, representing a projected decrease compared to the same period last year. 

The company is expected to remain unprofitable for the next couple of years as the best-case scenario, per analyst projections. There are better options out there for investors to take advantage of.

Mullen Automotive (MULN)

Source: Robert Way / Shutterstock.com

Mullen Automotive (NASDAQ:MULN), often buoyed by social media hype, has seen its stock plummet despite briefly regaining Nasdaq compliance.

MULN is a meme stock rather than a serious invest that is bullish on the long-term prospects of the industry. It could already be dead in the water, as its stock price has fallen 99.83% over the past year alone.

Financially, MULN recorded its first revenue from vehicle sales in 2023, delivering 35 vehicles and generating $366,000 in revenue. However, the company faced significant non-cash write-downs due to decreased market values, including a $64 million goodwill impairment charge and write-downs of other assets.

There’s not much sense in holding on to a company that is struggling this much, and its prospects for recovery are limited, having delivered just 35 vehicles. Although it may trade as cheap as lottery tickets, its negative free cash flow of $226.48 million for the past twelve months means it must institute a capital raise, either thru debt or equity, thus making it riskier still to hold on to.

Faraday Future (FFIE)

Source: T. Schneider / Shutterstock.com

Faraday Future (NASDAQ:FFIE) is concentrating on reducing operational costs and achieving cash flow breakeven. A focus on cost reduction — specifically in the Bill of Materials — has led to significant savings, such as an approximately $50,000 reduction in costs for a key vehicle component.

However, and despite these efforts, this probably will not be enough for Faraday to turn its fortunes around. Faraday has displayed signs of financial distress, as indicated by an Altman Z-Score of -12.52, suggesting a high risk of bankruptcy.

These problems are underscored by its negative cash flow of 290.29 million, and analysts predict that it won’t break even in the foreseeable future. Like Mullen, it must raise funds either through debt, equity, or both. Its tiny stock price and market capitalization may offput creditors to lending it funds.

Faraday simply poses too much risk for a relatively small upside, so this fits into the basket for there being better opportunities elsewhere.

On the date of publication, Matthew Farley did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Matthew started writing coverage of the financial markets during the crypto boom of 2017 and was also a team member of several fintech startups. He then started writing about Australian and U.S. equities for various publications. His work has appeared in MarketBeat, FXStreet, Cryptoslate, Seeking Alpha, and the New Scientist magazine, among others.

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