While electric vehicles (EVs) are expected to ultimately rule the automobile market, investors are currently rotating away from overvalued EV stocks toward quality stocks that are expected to gain with the economic recovery. Both Fisker (FSR) and Nikola (NKLA) are currently trading at more than 50% below their all-time highs. However, these two stocks are nonetheless still trading at valuations that we think are not justified by their growth prospects. Read on.The last year has seen significant investor interest in the electric vehicle (EV) industry, as governments worldwide announced initiatives to address climate change concerns. The future of the global EV market looks promising, with big opportunities for growth in the battery, hybrid, and plug-in-hybrid EV markets. According to Globe Newswire, the global EV market is expected to grow at a CAGR of 29% from 2021 – 2026.
However, investors’ ongoing rotation away from the EV stocks to cyclical industries to capitalize on the impending economic recovery is driving a sell-off of overvalued EV stocks. In addition to valuation concerns, rising global competition in the EV space and a semiconductor chip shortage are raising investor concerns regarding the industry’s near-term prospects.
Fisker Inc. (FSR) and Nikola Corporation (NKLA) have already lost significant value since hitting their all-time highs and will likely suffer further declines because they still look overvalued at their current price levels considering their bleak near-term growth prospects. So, we think it could be wise to avoid these stocks now.
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