Electric vehicle stocks have had a great year in 2020, despite a global pandemic that has hampered auto sales and dramatically lowered the number of miles people are driving. But none of that matters when investors are betting on these growth stocks…
Three of our Foolish contributors got together to lay out their most overvalued EV stocks right now, and it should be no surprise that Tesla (NASDAQ:TSLA), Workhorse Group (NASDAQ:WKHS), and Blink Charging (NASDAQ:BLNK) made the list.
Tesla’s stock has gone crazy in 2020
Travis Hoium (Tesla): There’s a lot to admire about the auto company Tesla is building, but its stock is downright insane right now. Shares are up 680% in the last year, and this is now one of the most valuable companies in the world. This is despite expecting to ship only 500,000 vehicles in 2020, compared to General Motors (NYSE:GM) delivering 7.7 million last year and Toyota (NYSE:TM) delivering 10.7 million units.
In some ways, it makes sense that Tesla is more valuable than legacy automakers. It’s growing faster, isn’t bogged down by a dealer network, and generates higher margins. But the price-to-sale and price-to-earnings ratios you see below show that Tesla’s valuation is insanely high compared to these companies.
While legacy automakers are starting to launch more compelling electric vehicles, the biggest reason I would be worried about Tesla’s stock is its self-driving business. Companies like Cruise (majority-owned by GM) and Waymo (owned by Alphabet) are already beginning to launch autonomous ride-sharing programs in the U.S., and ultimately that’s a bigger disruption to transportation than electric vehicles were to ICE engines. And Tesla’s autonomous technology is well behind Cruise, Waymo, and many others in the industry.
The excitement about Tesla’s business is understandable. Customers are extremely loyal and love their vehicles. But I think disruption is coming to the auto business long before Tesla lives up to its current valuation, and that’s why the stock has run too far, too fast.
A valuation like no other
Howard Smith (Workhorse Group): It’s hard for an investor to get past emotion and to go against a wave of interest (and money) going into a new and exciting sector. Electric vehicles (EVs) is certainly one of those sectors right now.
Shares of Chinese EV makers have soared recently, as sales figures are showing strongly accelerating growth with projections for it to continue. NIO (NYSE:NIO), for example, just reported deliveries soared by 155% year over year in its third quarter, and
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