Wednesday, 15 May 2024

Why These Former Meme-Stock EV Companies Are Surging Now

by BD Banks

Monday’s surprising meme-stock revival continued into Tuesday’s trading, as a number of volatile former favorites saw their shares soar again on little news. As was true a few years ago, electric vehicle (EV) stocks were among the big winners on Monday, and the action has continued today.

Here are where things stood for these three past-and-maybe-future favorites as of 11 a.m. ET on Tuesday.

  • Lucid Group (NASDAQ: LCID) was up about 15.1% from Monday’s close.
  • Nikola (NASDAQ: NKLA) was up about 5.7%.
  • QuantumScape (NYSE: QS) was up about 5.5%.

What’s driving this meme stock revival?

This renaissance seems to have started over the weekend, when a social media personality who inspired a series of major short squeezes in 2020 and 2021 (and who uses the alias Roaring Kitty) posted to Reddit for the first time in roughly three years.

All three of these stocks had huge run-ups during the meme stock era, as Reddit users and other investors took advantage of high short-seller interest to trigger squeezes, pushing the stocks’ prices sharply higher for a while.

Why These Former Meme-Stock EV Companies Are Surging Now

Data by YCharts.

Those run-ups didn’t last, as you can see. While both Lucid and Nikola have since brought EVs to market, both companies’ stocks are currently trading at fractions of the valuations they had at their peaks.

QuantumScape has also made progress since its stock’s late 2020 peak, but the story is different.

At QuantumScape, the slow work of battery R&D continues

Battery technology moves very slowly. For QuantumScape, that means the investment case for the stock hasn’t really changed since the meme stock era.

In 2020, QuantumScape was working on advanced solid-state batteries for EVs that it hoped to commercialize around 2025 or 2026. While the company’s work has advanced considerably since 2020, that timetable still holds true in 2024.

In general, the battery start-up tends to make little news and few announcements between its quarterly reports, as you would expect of a company that remains focused almost entirely on research and development.

Lucid: Sales are steady, but big growth is now a few years away

Lucid said last week that while its first-quarter revenue was better than expected, its loss was wider than Wall Street was hoping to see. Importantly, the company confirmed that its second model, a big electric luxury SUV called the Gravity, is on track for a production start before the end of 2024.

The wider-than-expected loss was driven in part by the timing of the capital expenditures Lucid is making to prepare for the Gravity’s launch.

A Lucid Gravity, a big electric luxury SUV, in front of a modern office building.

Lucid’s next model, the Gravity electric SUV (above), is on track for production by year-end. But more affordable Lucids are still over two years away. Image source: Lucid Group.

Importantly for investors, Lucid also said that it now expects its long-planned midsize models to begin production in late 2026, meaning that significant sales — and significant revenue growth — are unlikely before mid-2027 at the earliest.

Nikola now looks to expand sales and service beyond its current regional footprint

Nikola also reported its first-quarter results last week. It began shipping its second model, an electric heavy truck powered by a hydrogen fuel cell, late last year. Through the first quarter, it has shipped 75 of those trucks, a seemingly small number but ahead of its previous guidance.

A Nikola Tre FCEV, an electric semi truck powered by a hydrogen fuel cell, towing a trailer uphill.

Through the end of the first quarter, Nikola had shipped 75 of its long-range fuel-cell-powered electric semi trucks. Image source: Nikola.

Nikola has also begun building out hydrogen refueling stations along key routes to support fleets operating fuel-cell trucks (its own and those made by other manufacturers). It said last week that it now expects to have 14 new stations up and running by year-end, up from nine in earlier guidance.

Nikola has so far focused its efforts on California and Canada, but CEO Steve Girsky said that the company is ready to move beyond those markets. It’s actively seeking partners to help it develop hydrogen refueling stations in other parts of the U.S.

Nikola has also begun the process of monetizing the regulatory credits it has received to date under government programs, and said it expects to recognize revenue from the sale of its 2022 credits in the second quarter.

What do these stock surges mean for investors?

The simple answer is that they don’t mean much. The investment cases for all three of these companies are long-term ones; whether the stocks are trading at $3 or $5 or $10 today doesn’t change that. As always, it’s best to look past short-term volatility to focus on what’s actually happening in the companies’ labs and factories.

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John Rosevear has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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