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In the face of a global semiconductor chip shortage, the electric vehicle (EV) industry is struggling. Because several manufacturers plan production cuts due to the chip crunch, the industry is expected to generate weak momentum in the near term. Therefore, we think it may be prudent to avoid financially weak EV stocks Fisker Inc. (FSR) and Lordstown Motors (RIDE), whose ratings have recently been downgraded by Bank of America (NYSE:BAC). Read on.Electric vehicles (EVs) are expected to dominate the automotive market eventually as governments across the world implement various measures to reduce carbon emissions. However, recent production and supply bottlenecks have caused some companies in this space to suffer declining financials.
A worldwide semiconductor chip shortage is expected to stifle the EV industry's growth prospects because several players intend to drastically reduce output and close down factories temporarily. Furthermore, intense competition in the EV space as dominant automakers increase their EV investments to capitalize on the industry tailwinds could mar the growth of smaller players.
Thus, we think investors should avoid Fisker Inc. (FSR) and Lordstown Motors Corp. (RIDE), which were recently downgraded by analysts at Bank of America, given these companies’ weak fundamentals and negative earnings growth potential.
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