Electric vehicle (EV) stocks are having a great run. Over the last few months, many have rocketed higher.
This rise hasn’t gone unnoticed by short sellers (sophisticated investors who seek to profit from falling share prices). Right now, short sellers are betting against a number of EV stocks with the expectation that they’ll crash.
Here, I’m going to highlight three EV stocks that short sellers are currently targeting. Given the high level of short interest these stocks have, I’ll be avoiding them for now.
Lordstown Motors
Let’s start with Lordstown Motors (NASDAQ: RIDE), which specialises in pick-up trucks and work vehicles. At present, around 39.1m Lordstown shares are being shorted, which equates to short interest of 35%.
It’s not hard to see why the short sellers are targeting Lordstown. For starters, this company has experienced a number of delays getting to production. Recently, it pushed its production timeline out again. It now expects commercial production of its Endurance pick-up truck to start in the third quarter of 2022, as opposed to the second quarter.
Secondly, the company is under investigation from the US Securities and Exchange Commission (SEC) in relation to its deal to go public.
It’s worth pointing out there has been some positive news in relation to Lordstown recently. Earlier this month, the group sold its Ohio factory to manufacturing giant Foxconn. The buyer also signed an agreement to help Lordstown manufacture its vehicles.
Overall, however, there appears to be a lot of uncertainty here.
Nikola
Another EV stock that short sellers are betting against is Nikola Corp (NASDAQ: NKLA), which is developing a range of battery/electric semi-trucks. At present, around 70.7m NKLA shares are on loan, which equates to short interest of around 35%.
Like Lordstown, this company has also been investigated by the SEC. Earlier this month, Nikola said it was working with the US financial regulator to settle charges against founder Trevor Milton, who allegedly misled investors about the company’s technology and capabilities. It seems the company may be facing a fine of $125m. It’s worth noting that some of the claims against Nikola were originally unearthed by short seller Hindenburg Research, which published a scathing report on the company last year.
Nikola is currently trying to sue Tesla over the design of its electric truck. If it wins, it could receive billions in damages. This could improve its outlook. I’m not expecting Nikola to win though. One expert says Nikola’s claims against Tesla are ridiculous.
Fisker
A third EV stock with high short interest is Fisker (NYSE: FSR). It’s developing the Fisker Ocean, an all-electric SUV designed by Danish automotive designer Henrik Fisker, who designed Aston Martin’s DB9. At present, 59.8m shares are on loan here, which represents short interest of around 42%.
Fisker appears to have a good product. Its flagship model, which is set to go into production in 2022, has already received a lot of orders. It also has some big partnerships, including deals with Magna International and Foxconn.
What stands out here however, is the valuation. Currently, Fisker has a market-cap of around $6.3bn, despite the fact that it’s yet to produce a car. Clearly, the short sellers see this valuation as too high.
Given the high level of short interest here, I’ll also be avoiding this EV stock for now.
Edward Sheldon has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
This post was originally published on Motley Fool
