Governmental policy support and consequent investor optimism have propelled many electric vehicles (EV) stocks to fresh highs over the past year, making them some of the most talked about stocks in the Reddit WallStreetBets (WSB) chatroom. However, the global shortage of semiconductor chips and other raw materials makes the near-term prospects bleak for Reddit EV favorites Tesla (NASDAQ:) and NIO (NIO). In fact, despite retreating from their highs, these two stocks still look highly overvalued. So, we think they are best avoided now.On the one, hand investor optimism over the long-term prospects of the electric vehicle (EV) industry, due, among other factors, to increasing governmental initiatives worldwide to shift to zero-emission transportation systems helped most of the EV stocks rally over the past year. But on the other hand, given the industry’s solid growth potential, many production companies have shifted their focus to building EVs and efficient auto parts, causing the industry to become significantly overcrowded.
Owing to the impressive stock market performance of many EV stocks over the past year irrespective of fundamental strength, the industry has caught the eye of Reddit chatroom WallStreetBets (WSB). The Reddit forum has been trying to precipitate another Gamestop (GME)-like short squeeze. The relative overvaluation of the industry has led to potential asset bubble concerns because most companies are currently trading significantly higher than their revenue and earnings potential would imply.
Tesla, Inc. (TSLA) and NIO, Inc. (NIO), two popular EV players, are found frequently in the Reddit forum’s top 10 dashboard. These stocks are now losing momentum after an impressive rally over the past year. Their overvaluation and the dour expectations of Wall Street analysts about their growth prospects make them best avoided now.
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