When Nio (NYSE:NIO) topped $66.99 and fell for much of Feb. and the beginning of this month, Xpeng (NYSE:XPEV) and Li Auto (NASDAQ:LI) fell with it. None of the firms are profitable yet.
Tesla (NASDAQ:TSLA) also fell alongside these EV plays. Investors insisting on buying the dip in EV for the bargain should exercise caution. Ironically, Tesla is not a bargain stock but has the best chance of rebounding. The global expansion, Gigafactory building worldwide, and the network of superchargers favor Tesla’s chances of long-term survival.
None of the China-based firms have the capital needed to expand globally. They sold shares already, albeit early, too. If it seeks another capital raise, it will dilute investors again.
Nio’s 14 cent non-GAAP EPS loss is troubling. Its revenue grew by an impressive 149.3% Y/Y to $1.02. Continued losses will weigh on shares if the negative sentiment on the Nasdaq continues. Investors may hope for a reversal. Renewed optimism of stimulus money making its way to stocks may recharge the EV hype. Such a bullish scenario may prove short-lived. Consider using any rally to sell EV stocks.
Your Takeaway
EV stocks are looking like a bargain bin trade. They may have dipped far enough to speculate on. Markets may renew their buying interest in the most speculative sectors like EV and clean energy. If buying on the dip, get ready to sell for a small profit.