A semiconductor chip shortage and overvaluation concerns have been taking a toll on electric vehicle (EV) stocks of late. While the EV industry's long-term prospects look bright, many companies in the sector with weak fundamentals are expected to continue retreating in the near term. Goldman Sachs (NYSE:GS) recently downgraded EV manufacturers Fisker (FSR) and Lordstown Motors (RIDE). So, let’s look at those names.Electric vehicle (EV) stocks saw an astonishing rally last year on investors' exuberance over the industry’s huge growth prospects. Worldwide governmental initiatives to shift to zero-emission transport as part of the broader goal to build a sustainable energy-based future motivated investor to bet on EV stocks, in some cases irrespective of their fundamentals. In fact, the industry’s potential growth made has caused it to now be, arguably, overcrowded with new entrants.
Nevertheless, the optimism over the industry and the consequent rally in EV stocks pushed shares of most industry participants to valuations that often don’t justify their current fundamentals and growth prospects. Furthermore, a semiconductor shortage is causing operational disruptions at many established EV manufacturers. Investors also expect a dip in EV demand with an anticipated decline in crude oil prices in the coming quarters.
Consequently, many EV players that lack the fundamental strength to survive these headwinds are expected lose value. Goldman Sachs recently downgraded Fisker Inc (FSR) and Lordstown Motors Corp (RIDE). So, it could be wise to stay away from these stocks now.