So far, 2022 has been a tough year for the markets; with the Nasdaq falling 20% year-to-date, it has officially entered bear territory. High growth names and tech stocks have been hit particularly hard, with electric vehicle (EV) stocks being no exception.
The Federal Reserve (Fed) seems to carry most of the blame as its aggressive approach to dealing with rising inflation has in turn, increased Treasury yields. Most EV companies are not particularly profitable today therefore, valuations are based on future expected profits.
As Founder and CEO of Compound Capital Advisors, Charlie Biello shared on May 10, a list of EV stocks that are on average 76% below their all-time highs. In particular, the leader of the pack Tesla (NASDAQ: TSLA) is down 36% from its all-time highs.
Other competitors such as Li Auto (NASDAQ: LI) and Lucid (NASDAQ: LCID) are down 57% and 72%, respectively. The stand-out among the losses is Lordstown Motor Corp (NASDAQ: RIDE), which is down 94% from its all-time highs, trading at $1.78 while at its heights the shares traded hands at $29.
Cornucopia of issues
Currently, numerous issues are hurting EV stocks, it is therefore possible that this trend will continue, which in turn, may continue to drive down share prices in the near term.
Similarly, lithium prices are soaring which could drive up the prices of batteries, which is why some EV companies were considering getting into mining.
The next set of issues was highlighted by stated by Brian Price, head of investment management, Commonwealth Financial Network:
“The overwhelming focus continues to be on inflation, rising interest rates, and the war in Ukraine,” Price said. “The combining factors of tight supply chains resulting from China’s zero Covid policy, and rising oil and food prices due to the war in Ukraine, are causing inflationary fears that are triggering a move out of risk assets.”
On the other hand, it is also likely that government support is likely headed for electric vehicles which may reduce EV prices allowing more people to own them.
All in all, for long-term investors, current market fluctuations could be an opportunity to buy more shares of their favorite EV company.
Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.