Lordstown Motors (RIDE) won’t exist 5 years from now.
Neither will Nikola (NKLA).
But NIO (NIO) and Tesla (TSLA) should thrive.
EV stocks remain extremely popular.
Our TrackstarIQ data shows Tesla as a top stock every week.
Even Nio appears in the top slots.
But those ‘second-tier’ companies…
They pop up like a prairie dog, only to scurry away.
What is it that makes some EV companies better than others?
I’ll tell you.
Horrible hydrogen
We’re past the point of worrying about exploding cars.
But hydrogen technology hasn’t changed in almost 50 years.
Although it’s one of the most abundant resources in the universe, it’s not easy to come by.
Current technology uses electrolysis to get hydrogen out of water.
Basically, zap it with electricity.
It’s significantly less efficient than pulling oil out of the ground.
And we’re nowhere close to the infrastructure necessary to make it a viable option.
Companies like Nikola (NKLA), Fuel Cell (FCEL), and Plug Power (PLUG) all play in this space to some degree.
None of them generate positive operating cash flow, let alone any profits.
These companies are the very definition of zombie corporations. They wouldn’t exist without the record-low borrowing rates that enable them and investors to gorge on debt.
Point is, there is ZERO sustainable advantage here.
And once interest rates climb, these guys will look like that gif.
Competitive advantage
Tesla owns reams of data and amazing self-driving technology.
NIO is one of the first companies to introduce a solid-state battery.
These are REAL marketplace advantages – ones that provide value that is unique to these companies.
Fisker Automotive (FSR) is trying to join its ranks.
And maybe they will.
But at the moment, Nio and Tesla have two things that most of these other companies don’t:
- Sales
- Cash
It’s mind-blowing right?
You have multi-billion-dollar valuations on companies that have made $0 in revenue.
To be fair, FuelCell generates revenue and turned a profit as recently as 2018.
But Nikola is a dumpster fire of a company.
Their former CEO quit after accusations of marketing fraud via a Hindenberg report.
And their strategic partnership agreement with General Motors blew up shortly thereafter.
Yet, they still garner a $3.78 billion dollar market cap.
That’s more than Express Clothing, Rocket Mortgage, Bed Bath and Beyond, and Flour Corp.
AND THEY’VE SOLD NOTHING!
It’s reminiscent of the dotcom companies investors valued based on clicks.
Our hot take
Do your homework on these companies before you invest in them. Don’t just grab a ‘green energy’ name because it showed up on someone’s top 10 list.
Make sure it fits your portfolio and has a path to success.
Treat these as speculation plays until they prove themselves and adjust your risk accordingly.
