EV Stock Investors Can't Ignore the Latest Industry Warning Sign

After 's (NASDAQ: TSLA) dramatic rise in 2020 and 2021, investors seemed to be convinced of one thing. Electric vehicles (EVs) are the way of the future, and huge spoils will come to those who win the competition.

Since Tesla's breakthrough moment when it generated its first profit, investors have awarded sky-high valuations to EV stocks. Tesla currently trades at a price-to-earnings ratio of 71, which compares to single-digit earnings multiples for legacy automakers like Ford Motor and General Motors.

Unprofitable start-ups have seen even more inflation in their valuations. Rivian Automative (NASDAQ: RIVN), for example, went public with a market capitalization well above $100 billion. While it's fallen sharply since its debut at the end of 2021, it still has a market cap of $17 billion. And with wide losses -- and profitability likely years away -- the stock still seems priced for perfection. QuantumScape (NYSE: QS), meanwhile, the development-stage maker of solid-state batteries, has a market cap close to $4 billion and no revenue.

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Source Fool.com